In the past 2 weeks we’ve been hearing reports of the battle for the remainder of this year’s corn crop. On July 25 I wrote about the battle for the available supplies using local basis bids versus historic bids to see how tight supplies might become.
It appears that we’re going to have enough corn to feed. While it may be at a price we don’t like (bid is $7.61/bu at Sioux Center, Iowa this afternoon), at least the basis has lowered, suggesting supplies will be adequate. On July 25 Sioux Center was bidding +$0.33 while the basis bid today is only $0.08. I did an internet search of other corn purchase sites that I routinely check and all of them have dropped their basis bid by $0.30-40/bu from the July high. I even saw a covered pile of corn at a regional coop that grinds a lot of hog feed this morning. It looks like feed supplies, while expensive, will be adequate.
However, the results of the ProFarmer crop tour are sure to make feed grains even more expensive. They peg the US crop at only 12.48 billion bushels and 147.9 bu/a, well short of the 13+ billion and 160 bu/a that everyone was hoping for when we put the crop in the ground.
The disappointment in the size of the crop and the resulting increase in price has already shown up in feeder pig and SEW prices. Today’s USDA Feeder Pig price report had a low of $5 for SEW pigs, something we haven’t seen since August of 2009. The absolute spread in price (from $5 for the lowest price paid per pig delivered to $47 per pig delivered) is the widest I’ve seen since I’ve been tracking the data. Either someone has corn locked in at a relatively good price (something under $6.50/bu), or gambling has returned to the pig industry.
Many producers have historically bought corn from neighbors this time of year as they clean out bins to make way for the new crop. In past years, this has been a good time to buy as supplies were more than adequate with carryout numbers being more than ample. This year, if that was your buying strategy you’re facing some of the highest prices ever paid for corn. Even with lean hogs closing at $84.57 for December and $97.15 for next June, there isn’t much room to lock in profits with feed ingredient prices this high.