Despite Volatility in Grain Markets, Prices Moving Higher

DENVER, CO – Despite COVID-19, grain has been moving and basis has generally tightened since April with both positive and negative volatility depending on the month and specific grain.

According to CoBank’s Knowledge Exchange Division, the second quarter was eventful for the U.S. complex and while futures prices for corn, soybeans, and wheat are lower year-to-date, basis is generally stable or improving. Corn basis has tightened as domestic ethanol production begins to recover from the negative demand shock of COVID-19 in mid-March.

Wheat basis tightened in late January and February due to increased demand as consumers began baking and eating more packaged and self-prepared food at home. Basis leveled off as production increased and elevators moved grain out of storage to satisfy both domestic and export demand, and to make room for the new wheat crop.

A new issue that surfaced late in the quarter may impact wheat prices and basis in the future. Wheat weights in certain parts of Kansas tested below average, presumably the result of hot, dry temperatures and high winds earlier in the growing season. It remains unclear how much of the state’s crop is of low weight and quality and what percentage will be sold into the feed market or blended.
(SOURCE: CoBank Knowledge Exchange)