Corn basis patterns

This week I was reviewing DDGS pricing and nutrient assays from a number of ethanol plants in southern Minnesota and Northern Iowa. It was interesting to note the wide variation in grain pricing for December delivery to the various plants. December basis ranged from -$0.25 to -$0.10. For many of the plants with a -$0.10 basis for December delivery, the basis widened to -$0.25 or more for January deliveries.

These basis bids compare to historic basis bids at this time of year of -$0.35 to -$0.50 or even higher. The very narrow basis for December at many ethanol plants suggests that corn is being held by producers who don’t have a need for additional cash income in December. For income tax purposes they are deferring sales until 2012 as much as possible.

On the other hand, those ethanol plants with a wider basis most likely have more corn already committed for December deliveries and don’t have to participate in the cash market as much to meet their December requirements. What we don’t know from the basis bid is what they offered at some earlier point in time to secure this corn for December delivery.

Feedmills have to compete against ethanol plants for corn deliveries. As I look at basis bids at various country elevators with feedmills, I see a wide variation in the bids, especially for December delivery. With the increased competition for this year’s limited corn crop, it appears that allocation of the supply is already occurring, not only at the Board of Trade but at local delivery points as reflected in local basis bids versus the board. Historic basis patterns appear to be something buyers of corn in the western corn belt can only dream about in the coming year.

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