Narrowing futures spreads

By Jon Scheve, Superior Feed Ingredients, LLC 

Many U.S. farmers are not selling grain at current low prices. The reason might be because so many farmers have a breakeven for the 2023 corn crop above $5. It seems likely the farmer does not want to sell corn at cash values below $4.50 before they plant next year’s crop.

This has contributed to the May/July corn futures spread narrowing from a 14-cent carry two weeks ago to a 9-cent carry this week. The reason the spread would narrow is because there is demand from the export market for cash corn along the Mississippi and Illinois river when farmer selling is light.

That spread change may mean little to farmers, but to those who profit from storing grain, it is more than a 30% drop in potential revenue over the next two months. Additionally, the basis has had at least a 10-cent increase in the western Corn Belt over the last few weeks.… Continue reading