Yesterday’s USDA acreage and stocks report is still sending tremors across the country. Maybe one of the most un-talked about consequence of two days of near limit down moves in the corn market is the difficulty of feed mills in accessing corn.
If I were a grain farmer with unsold corn, I would not be in the mood to sell it to a feed mill or production system needing corn for pigs at the moment. In the past 2-3 weeks, I would have seen the value of my unsold grain decline as much as $1.50/bu. Everyone will be sitting tight on the existing unsold supply waiting for some type of recovery in the market.
For those buying corn and needing inventory to make pig diets, accessing the remaining unsold grain just got harder. While the swine industry was worried about having inventory to grind in late August and early September, getting inventory delivered to mills in July may be a problem, even if the corn is in bins on –farms or in storage at the elevator.
One web site that I follow to get a sense of grain trade issues is http://www.farmerscoopsociety.com/fcs/default.aspx. This site is for the Farmers Coop Society in Sioux Center, Iowa. This coop is a major user of corn for cattle, pigs and laying hens. They are in the middle of Sioux County, Iowa, the most livestock intense county in Iowa and often have to pull corn from 100+ miles away to meet their milling needs.
For the past month, their local bid for corn for July and August delivery had been running about 7-10 cents under Chicago (basis). The historic basis bid for many Iowa locations is closer to -$0.30-0.35 so you have some idea of the intensity of the corn demand at this coop. This afternoon, the basis on cash bids is posted at +$0.19, a $0.30 swing in basis.
For those of us buying cash corn for feed needs, even though the Chicago Board has come down quite a bit in price, this doesn’t translate into a similar reduction in the price we must pay. It appears that in order to pry corn out of unsold inventory mills are going to have to be pretty aggressive in their basis bid, often paying what are historic basis levels to get grain to feed. Cheaper corn in Chicago doesn’t mean cheaper corn in our swine diets the rest of this summer.