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Historically tight basis could mean opportunity

Historically tight basis could mean opportunity

Harvest - Combine loading into truck

It is harvest time, and no other issue can overshadow that one when it comes to the grain markets.

For farmers, there are several things to consider when looking at marketing plans in the midst of the 2021 harvest season, according to Don Roose, president of U.S. Commodities in West Des Moines.

Prices are historically high this fall, Roose says. But eyes are starting to switch to the South American crop, where planting has started. Brazil is seeing ideal conditions while about half of Argentina is dry.

There is plenty of chatter in the market about inflation. Farmers are concerned that next year’s input costs are going to go up, thanks to inflation and supply-chain issues. Ethanol and soy crush are both strong, as well.

As harvest starts to wind down in some areas, soon it may mean more grain moving to market, and that could benefit processors.

For farmers, one of the things to watch is the basis. Roose says the basis is strong and historically tighter than normal. That could provide an opportunity for farmers. There is a strong incentive to sell and to not worry about retaining ownership, he says. For those with on-farm storage, there is a carry in the market that could be beneficial.

Either way, he says marketing plans should take the basis into consideration this fall. Cash flow will also be a factor.

Meanwhile, the trade will continue to watch the harvest numbers and it will also begin looking at the information coming from South America, where both soybean and corn production is expected to rise in the next year.

Right now, Roose says, the old saying “the cure for high prices is high prices,” may hold true as production rises to meet the strong demand and to take advantage of today’s strong prices.

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Gene Lucht is public affairs editor for Iowa Farmer Today, Missouri Farmer Today and Illinois Farmer Today.

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