Grain marketing question - basis

Osterbur · Oct 22, 2009

What affects the basis price the elevator charges when selling corn and soybeans. Its normally a fee
of 20 to 25 cents per bushel, but last summer the
basis went positive for 2 or 3 months. I am trying
to get a handle on marketing grain as I am a novice at this. Thanks in advance for any information.

Anonymous-0 · Oct 22, 2009

Basis is a made up thing... they just pick it outta thin air really. If they need grains more or less the basis is the opposite of the need. If you are trying to figure out how to best market grain good luck as every day is different. All depends on what the fellas in Chicago feel like doing that day and in the grand scheme it is only that and nothing else although they claim it is the weather here or there, the ending stocks, domestic or foreign use, or the expected yield but all comes down to what they feel like doing.

IaGary · Oct 22, 2009

Here lately the grain processors need more grain then is available. So to encourage more grain purchases they offer a higher price for grain then the CBOT price.

This is a positive bases.

When they get all the grain they need and pay below CBOT, the bases is a negitive.

The bases your elevator charges remains constant. They know their cost to transport the grain and the cost of paperwork to make the transaction.

And when you figure out the reasons for the ups and downs in the market you no longer need to farm. You just play the Board of Trade.

Gary

paul · Oct 22, 2009

I hear you.

Tho, the basis is the local conditions, not what the fellas in Chicago decide, but what the local buyers (feed plant, ethanol plant, dog food maker, oil seed crusher, terminal to export, etc....) decide. Thos within 100 or 2 miles of you, they figure out how much more or less they need a crop that week, and that determines the basis, which is the difference - positive or negative - from the guessing game the Chicago fellas do.

Typically during harvest they have a whole lot of grain to pick from, and the basis goes pretty bad. In mid summer if crops are short, the basis can look a lot better. But if it looks like a huge crop is going to be harvested in fall, the basis can fall apart early.

This is a strange year - we are 3-4 weeks past normal harvest time, and not harvested much 'here'. All the feed plants ran short of corn a while ago, and the bean processors as well. So, basis has picked up quite a bit - but we don't have any crops harvested to actually sell! If harvest ever goes again, basis will turn down real fast.

--->Paul

Big M · Oct 23, 2009

We can put a man on the moon and maintain an international space station. Can't someone come up with a better idea for the prices of local elevator than the whims of the CBOT or KCBOT? Those "fun" buyers make money when it goes up and on the way down and they never own a kernal of grain.

Anonymous-0 · Oct 23, 2009

When there is a winner there is a loser and when there is a loser there is a winner..cant play the market both ways.

Anonymous-0 · Oct 23, 2009

It is common to blame the various Boards of Trade or the speculators for unwanted market fluctuations (I often do). BUT, it is a price discovery system. Try marketing peas, lentils, flax or something that has no Futures market and see if you can make any sense out of it. I believe the definition of basis if the diff. between nearby futures price and cash price. From a farmer's point of view a small or negative basis is a good thing.

big jt · Oct 23, 2009

Geez not sure I should even get into this one.

Basis used to be what it what it would cost to handle the grain and get it to the river. Yep it flucuates always has and always will. Many Many factors involved but all comes down to supply and demand in the local market.

at one time and to a lesser extent now feed use plays a role, Ethanol and bio diesal now have a major influence.

One thing you can usually count on is the basis will spread at harvest time. Lots of supply and the demand is always steady.

Clear as mud isn't it.

BTW if you figure out how the markets work and can predict them accuratly forget farming cept for play time and play the board. Much easier money if you know what it is gonna do. LOL

jt

Osterbur · Oct 23, 2009

I thought that the difference in price between the CBOT and the elevator was the cost of shipping and handling. So should the basis actually be called a premium or a discount from the actual buyers? Maybe its more of a local issue vs the CBOT price.

Grain marketing question - basis

Osterbur

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Anonymous-0

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IaGary

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paul

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Big M

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Anonymous-0

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Anonymous-0

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big jt

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Osterbur

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