Planting and Basis Considerations

Greg Mockenhaupt ProEdge Risk Management Consultant 

Greg Mockenhaupt
ProEdge Risk Management Consultant

Planting season is fast approaching, and farmers are soon to be in the field hard at work. This becomes a busy time of year and as producers/sellers head to the fields. I am in hopes this helps relieve the selling pressure and allows the market to continue its rally. 

When selling grain, there are two risk factors. Futures price and your basis level. The futures prices are determined by the Chicago Board of Trade, and the basis level is determined by the time and location of delivery. Many times it is easy to focus only on the futures price while basis can provide just as much risk.

Basis levels have been very soft as of late. It seems levels are dropping each day. After producers finish up planting, it is likely the focus will shift to moving unsold grain. I have had many conversations with producers across the trade territory, and there seems to be a lot of unsold grain in storage. I am very concerned about basis levels for late May, June, and July. Processors are already preparing for large amounts of grain to move after planting and are building it into basis.

Looking towards the basis is a significant risk factor for producers to consider on old crop. Basis contracts are readily available and can be used to eliminate basis risk. Before heading to the field, do not forget to consider the risk factors associated to basis. 

If you would like more information on basis levels you can contact a ProEdge Grain Specialist, or if you are a client reach out to your ProEdge Risk Management Consultant for basis information and guidance.