Producers looking to sell old crop corn must take a couple things into consideration.
They must first assess basis prices, according to Kent Beadle, director of producer brokerage at CHS Hedging.
?Now, basis levels are not quite as good as they were because of some loss of ethanol competition with a number of plants having either slowed or closed down. But in some areas, those basis levels are relatively good compared to the range those levels have been in the last four or five years,? Beadle said.
Beadle recommends the following to producers finding “reasonably good” basis prices.
“You might want to consider selling the cash,” Beadle said. “Then take a look at re-owning the futures portion of the sale with a strategy, whether it be long futures, a call option, or a call option spread – Something that allows us to get past this point in time, when ethanol plants are slowing.”
Analysts expect heighten travel by late summer, which in turn will increase ethanol demand and improve futures prices. Meanwhile, Beadle advises producers to remain patient and to hold off on selling old crop corn.
“If (both) futures and basis are poor, the marketplace is telling you to have patience and not sell anything at this moment in time,” Beadle said. “The question becomes: ‘Are things going to become worse?’ They could get worse temporarily, but we don’t think they’re going to get worse long-term.”
“First, we don’t think there’s going to be a lot of grain moved at this lower price. But there is still demand,” Beadle said. “We are feeding livestock, driving about 55-percent of what we normally drive, and have seen exports pickup. The marketplace is going to need to buy corn, but at this price, they’re going to have a hard time doing so,” Beadle said.
