The US corn and soybean harvest is near its end and it seems that the markets are trying to put in a low for the winter. Corn and soybeans both ended the week on s strong note led by soybeans. This was mostly technical trade but there is some concern over dryness in Argentina soybean planting areas. It was a nice end to the week that hopefully can give the market some support at these levels.
Brazilian corn plantings are slightly behind at 63% complete vs 79% last year and 65% avg. Mato Grosso production on the 2nd corn crop is expected to be down over 5 mmt to 25 mmt according to IMEA. This should give a little relief to the US exports for next summer though Argentine corn production is expected to be up 1 mmt from last year. The funds ended the week short over 230,000 contracts of corn so that also might put some support under the market. One constant seems to be strong demand at these lower levels.
Basis values on soybeans and corn continue to show strength across the country especially in areas where harvest is all but wrapped up. In Wisconsin we have been behind the curve on harvest this year and thus a mixed bag of basis values. In many cases the local end user has enough coverage through the end of the year. However, local interior markets have seen some improvement in basis values trying to pry some bushels out of the producers hands and to end the season with their elevators full. It is difficult to buy corn at these levels as they are well below cost of production for most. The yields on corn have been quite good which is helping offset the low prices some. Those producers with on farm storage have their bins crammed full and will wait to see if a price increase is in the works.
Getting a significant price increase may be difficult with the large carryout that we will see this year. It will probably take a production issue somewhere to change the trend of stagnant prices. One strategy this fall has been to sell corn for cash flow and to purchase call options against those sales out in the spring or summer. With the volatility being so low they can be bought for 10-18 cents which is well below commercial storage.
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