US farmers were aggressive sellers of soybeans last fall as prices climbed after trade relations eased between the US and China. With higher prices and a swifter pace of sales, commercial ownership of soybeans rose sharply while use of delayed pricing programs and basis contracts fell. Meanwhile, corn and wheat markets saw the opposite trend amid depressed prices. Farmers increased their use of DP programs and basis contracts for corn and wheat, leaving pricing open in hopes of future market recoveries.
According to a new report from CoBank’s Knowledge Exchange, off-farm grain storage hit record levels last fall with farmers shifting more soybeans and wheat to commercial storage to free up on-farm space for the record corn harvest. The report draws on CoBank’s proprietary data set, which includes grain companies from around the US that provide monthly borrowing base position reports. The surveys do not include farmers’ marketing positions for commodities stored on farm.
“CoBank’s data reveals that farmers have been patient sellers of corn and wheat,” said Tanner Ehmke, lead grains and oilseeds economist with CoBank. “Any material increase in corn and wheat prices will likely be met with heavier selling pressure compared to soybeans, which already experienced a higher level of farmer selling last fall. The increase in on-farm storage for corn implies there is more corn in the countryside also waiting to be priced, which will pressure both flat price and basis.”
Grain company ownership of soybeans in commercial storage jumped to 73.6% as of Nov. 30, up from 66.3% the year prior as farmers sold soybeans at a faster pace. The share of soybean bushels in commercial storage that were enrolled in DP programs and basis contracts also fell last fall as farmers priced soybeans during the market rally following the partial trade truce between the US and China.
Under a DP program, the farmer transfers title to the elevator with the option for the farmer to set futures and basis later while paying the elevator a monthly service fee. In a basis contract, the farmer locks in local basis when the contract is signed but leaves the futures price open to be set later.
“Participation in DP and basis contracts in soybeans also fell as a result of farmers’ concerns about market uncertainty ahead of the trade truce on Oct. 30,” said Ehmke. “Elevators also limited DP programs due to the risk of owning unpriced bushels in a carry market.”
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