Good morning,
Not a lot has materially changed over the past week—and that’s worth saying.
Here are a few of the things we’re watching and discussing as harvest continues.
What We’re Thinking About This Week
• The post-WASDE correction didn’t persist.
Last week we discussed the market’s disappointing reaction to a supportive WASDE report and questioned whether it might be the beginning of a larger correction.
So far, it hasn’t been.
Corn and soybean futures remain relatively rangebound but are starting this week on firmer footing. That doesn’t necessarily give us a new bullish signal, but the market’s ability to absorb the initial post-report selling has our attention.
For now, we’re willing to let the futures market continue to develop rather than force a flat-price decision.
• Soybean basis continues to stand out.
National soybean basis is roughly unchanged from last week but remains approximately 20¢ firmer than year-ago levels.
That’s meaningful as harvest gets underway and continues to support what we’ve been seeing from processors regionally: soybean end users appear willing to compete for ownership.
Corn continues to tell a different story.
National corn basis is also relatively flat week-over-week but remains a few cents weaker than a year ago. Among the four largest corn-producing states, Nebraska is currently the only one showing basis stronger than year-ago levels.
We’ll continue watching whether harvest pressure causes corn basis to weaken further or whether end-user demand begins to provide additional support.
• Carry is beginning to firm again.
Crop-year futures spreads are beginning to widen again after tightening considerably over the past several weeks.
That’s important.
We’ve been waiting to see whether the market would give us another opportunity to capture carry through hedge or HTA rolls—or potentially hedge the carry using futures bull spreads.
We’re not interested in capturing carry simply because it exists. It still needs to adequately compensate us for interest and other costs associated with holding grain.
But the direction of the spreads has our attention again.
• Harvest isn’t giving us one universal yield story.
Early harvest results have been mixed, which reinforces something we discussed last week:
What does your combine confirm about your marketing position?
The national yield debate is becoming less important to your individual marketing plan with every acre you harvest. Your actual production is replacing our preseason estimates.
Better-than-expected yields mean additional bushels and additional revenue potential—but they can also reduce your percentage marketed.
Lower-than-expected yields mean fewer bushels and a higher percentage marketed, which may change how we think about the remaining crop and opportunities to add upside against prior sales or hedges.
Please continue keeping your FWS Account Manager updated as yields develop. Actual production gives us better information with which to manage the remainder of the crop.
Where Our Attention Is Shifting
This is increasingly becoming a harvest execution market.
We’re still watching futures closely, but we’re spending more time evaluating:
- Actual production
- Local basis
- Carry
- Storage economics
- Harvest deliveries
- Existing contracts and hedges
We don’t need to manufacture a new market opinion every week.
We need to continually evaluate whether the information we’re receiving changes the plan.
So far this week, we don’t see a reason for a significant change.
Grain Marketing Thought
Quiet markets still require management.
Not every week gives us a major rally, selloff, USDA surprise, or obvious marketing opportunity.
Sometimes the job is simply keeping the existing plan aligned as new information arrives.
During harvest, that means updating production, monitoring basis, evaluating carry, managing contracts and hedges, and determining which bushels should be delivered, priced, or stored.
Individually, those decisions may not seem particularly exciting.
Collectively, they can have a meaningful impact on the value of the crop.
Have a great week,
Ron Wall
Flat Water Solutions, LLC