Let’s start out by saying it’s not all about the basis. I just wanted to catch your attention. Let’s be real though. There have been some eye-popping basis levels around the corn-belt over the last few weeks. I want to talk through what made this happen, why we’ve narrowed so much, and how I see basis playing out moving forward.

While there have been pushes going on for both corn and beans, let’s start with beans. If you look at a bid right in my backyard at ADM Decatur, IL, on September 21^st, basis was $1.85 over the Nov. $16.46 bid. The next day, that basis dropped to $1.50 over. On the 23^rd, basis plummeted to 15 cents over with a cash price at $14.41! In 48 hours, we saw a $2 drop in the price of cash beans!

Now why was basis so strong to begin with? As we coasted into harvest with few beans available in certain regions, end-users in those areas had no beans coming in. They had to source beans to keep plants going and get to crushing beans.

Part of the problem this year has been the bean crop was planted a bit later and many growers saw harvest pushed back a couple of weeks. While the September Quarterly Stocks report showed a carry in excess of USDA’s carry printed on the September WASDE report, it was clear beans were hard to source.

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Now that bean harvest is underway in earnest, that same plant is posting an option price bid. Basis hasn’t deteriorated much since the huge drop. However, it goes to show just how impressive bids can get when stocks are tight.

Corn dynamics

When it comes to corn, we have quite the dynamic here in 2022/23. While in my part of the world, basis at the processor was just 20 over on the same day beans were pushing $2 over, processors were actively pushing for corn through drying deals. Some offered no charge for drying with shrink only. That’s quite a deal on 25% corn when the competition is charging 8 cents/point.

With basis currently at 15 cents under, we’ve only lost 35 cents on basis with corn which pales in comparison to the drop in beans.

Corn migration

The big story for corn basis is how we’re going to get corn from the areas where we have better yields, to the areas that were hardest hit by drought this summer.

It’s no secret the western-corn-belt was more of a have-not on precipitation this year with yields much lower than normal. It’s also no secret this part of the world is a huge user of feed-grains. It makes more sense to know areas like Garden City or Liberal, Kansas have seen $2 over the board for corn. Those who grew a crop whether through irrigation or a lucky rain certainly benefit, but the real reason for the $2 over is to get the corn from other areas to where it needs to be.

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So, what does this all mean moving forward?

I believe for beans it’s rather unlikely we see basis levels anywhere close to what we’ve seen so far. Given a big U.S. crop and talks of another potentially big South American crop, world as well as U.S. supplies look to be stable enough to get us through this marketing year.

Corn could be a different story though. With beginning stocks for this marketing year getting lowered by 148 million-bushels on the September quarterly stocks report, the case can be made for new-crop stocks getting perilously close to a billion-bushels. Given this situation as well as the need to migrate corn from east to west, our assumption is corn basis should be well supported after an assumed cooling off during harvest. While $2 over may not occur for everyone, next summer could bring fireworks once again when it comes to basis.           

Be careful during harvest. Take a break here and there if at all possible.        

Feel free to reach out to me or anyone on the AgMarket team. We’d love to hear from you.