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| The cash basis is unusually wide. However, the costs of carrying grain are increased with higher prices, there is always a transportation risk (can grain be shipped in an orderly manner), the value of storage & handling shrink. A ½% shrink on a $2 item becomes significant on a $7 or $8 item. Plus, the name of the game is inventory turnover. I expect, as always, as we move forward into early winter, basis levels will improve; if flat prices decline.they may improve even more so.
In terms of longer term prices, I believe the first consideration is winter wheat acres; the market, in my opinion, has bought wheat acres throughout the world. The corn/soybean debate will continue for a few months.
This weekend, I am going to polish my personal crystal ball and play with longer term probabilities.
In the very short run, Dec 08 corn needs to hold the $4.01 area & if so, may be ready to test the $4.18 level. Nov. 08 beans act like they want to test $9.40, but if they can hold a close today above $9.57, think they will be okay. Dec 08 wheat, in my opinion, needs to close above $6.76 to prevent a test of the $6.50 area.
One of the problems this market has endured the past couple of days is this 30% & 50% tariff story out of Russia. Europe didn’t believe it…apparently some other folks did & they raced to liquidate the past couple of days. Yesterday’s action did some technical damage & it is important the market recover the balance of this week.
The demand story is yet fully unknown. When a couple large countries decide to subsidize domestic food prices, or implement price controls, it smacks of further difficulties down the road.
While it is important to remain in tune with these markets, it is also wise to sometimes ignore all of this “market noise” in terms of wild daily fluctuations. I sense a lot of large traders are pushing the spread between Dec 08 Corn and Nov 08 beans & think they are correct; except the market can only be stretched to some unknown point before it snaps back...a correction...
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A Reply to a couple of questions.
