A large carryover and another huge crop have created an attractive carry in futures markets, particularly for wheat, according to CoBank economist Will Secor.
“Current market conditions will provide elevators with better returns year-over-year if they’re able to purchase the grain,” Secor says. That’s also the message for farmers with on-farm storage.
The futures market “carry” has moved wider through 2018. That’s incentivizing ownership and storage of wheat and corn with their relative carry advantage to soybeans, Secor says.
Corn and soybean basis in most areas is tracking lower or approximately the same as last year, with large stocks and strong production outpacing demand growth. For wheat, basis is stronger with shrinking stocks, lower production and steady export demand.
“Elevators locking in basis at this stage are likely in good shape, as basis is at or near harvest lows,” Secor says. Again, the same is true for farmers who retain ownership.
On-farm storage capacity and local end-user demand are also likely to influence basis. Basis looks to strengthen this coming year as processors and ethanol plants work through grain stocks early in the year. “With strong domestic growth and tightening global corn and soybean balance sheets, strengthening basis offer opportunities for improving margins year-over-year,” Secor says.