February 27, 2009 - Don't forget the other half

There was a lot of stuff going on the last couple of days, most of it was negative to the corn market. The USDA released their first real ballpark estimate for corn and soybean acres yesterday with corn estimated at 86 million acres and beans at 77 million. Both were higher than expectations and compare to 86 and 75.7 last year. Today the USDA released preliminary Supply and Demand forecasts which put corn carryout at 1.72 billion and soybeans at 380 million bushels for the 09/10 crop year. These figures are more than adequate and led traders to feel there may be more of a cushion in carryout stocks than they had been expecting for both commodities. The outlook forecasts put out should be treated with a great deal of caution as the USDA was off by 4 million acres on both commodities a year ago...

Corn futures were $.115 lower today but December futures did manage to squeak out a gain of $.0125 for the week, normally that wouldn't be cause for excitement but this is the first weekly gain in seven weeks!

I wanted to mention a phenomenon that has generated significant interest this year for our customers and the Corn Belt in general, the basis contract. We have more bushels on producer basis contracts this year than ever, by a wide margin. This is a sign that producers have noticed the relatively strong basis we have seen, particularly in the case of soybeans, and have chosen to take advantage of the strong cash markets. We think it is a good thing to watch when the market signals indicate it is time to move grain. Lets not forget to market these bushels! In many cases this year producers who are doing the basis contracts have never done them before, lets remember that the grain marketing decision isn't over when you put the grain on a basis contract, the final price still needs to be set by pricing the futures portion of the contract. It seems that sometimes it is all too easy to put bushels out of mind once they are on a basis contract. It is easy to see why, the bushels are moved, you have received an advance on them, etc. Lets remember that final price still needs to be established on these bushels, meaning they are still subject to days like today.

Have a good weekend, Phil Farrell