As United States producers move forward, after the U.S. Department of Agriculture’s (USDA) release of the November World Agricultural Supply and Demand Estimates (WASDE) report, a Midwest broker encourages them to pay attention to two things: Basis and 2020.
Jim McCormick, branch manager of AgMarket.Net, says Friday’s report was just another step forward. He admits, “Moving forward, it?s going to be hard to get a supply driven move.? McCormick believes ?the better opportunity is going to be in the basis.”
?The cash market is having a hard time getting farmers to move grain when the future prices are around $3.75, so we?re seeing some phenomenal basis offers right now. As harvest is wrapping up, farmers have enough room to store this crop, so they don?t want to sell this price. You have places bidding 10 to 20 cents over December futures, where a year ago, they were 30 to 40 cents below the futures market.?
McCormick wholeheartedly believes an opportunity lies within basis right now. He shares, ?If you have a phenomenal basis, don?t be afraid to, at least, let some of that grain go because we?re not sure where we?ll be down the line.?
McCormick also encourages producers to look at their balance sheets. He shares, ?With an improvement in basis, I think cash balance sheets may be better than what producers were thinking a few months ago.?
Lastly, McCormick advises producers not to get all locked in on the 2019 crop. Instead, he instructs them to look at what is going to happen next year.
?We have corn trading around four-dollars for Dec 20,? McCormick said. ?The rhetoric is we?re going to plant a lot of corn. The trade is thinking up to 95 million acres of corn being planted in 2020. If we have 95 million acres of corn being planted, end up with a trend yield, and South America does not have a weather problem, you have a lot of people thinking this corn carryout will be up to 3 billion. If that?s the case, the fact of the matter is, $4 is going to look like a good price.?
