On the Downhill Slide

As summer fades to fall, the markets are poised to fade. But you’d never know it by our local basis levels. You’d think we were in the middle of a full blown drought with beans trading as much as two dollars over futures, old crop corn at 10 over and new crop corn sometimes selling for option price.

Of course, beans have a very good reason with the shortage in South America and export numbers here still holding up well. One has to wonder when the basis bubble bursts. My guess is when the first new crop soybeans and corn cross the scale. And my beans are starting to turn.

Although the supply of corn is ample we are still burning up traditional basis levels. Option the December for new crop? Not much carry there and it’s going to be hard to pay for a bin when you can sell cash and buy futures and let someone else have the headache.

Seems to me that again we are facing a turning point in the marketplace. Our largest grain users - livestock and poultry - are in trouble. Big losses are mounting and they need some relief.

Ethanol production has helped to push up corn and soybean prices but unfortunately, animal agriculture’s prices have not kept pace. Here’s hoping their prices rebound to place them once again in profitable territory. I would rather see that than to see our grain prices erode again to a level where animals are profitable at their current prices.

I’ve locked in bean prices for a chunk of my 2010 production. I don’t see us being in this price range a year from now, but weather can change all that. I’d rather sell and defend knowing that I have a profit locked in.

It’s also hard to believe that fertilizer will drop much lower than it is now. It looks like it will be at the bottom at harvest time this year and compared to last year will be a good buy.