AgriLife Extension economist: Unique wheat, feed grains marketing opportunity slipping away

Writer: Kay Ledbetter, 806-677-5608, skledbetter@ag.tamu.edu
Contact: Dr. Steve Amosson, 806-677-5600, samosson@ag.tamu.edu

AMARILLO – Producers holding wheat or feed grains have a great opportunity to cash in on an extremely strong basis for any stocks of wheat and/or feed grains on hand, said a Texas A&M AgriLife Extension Service economist.

Dr. Steve Amosson, AgriLife Extension economist in Amarillo, said the wheat basis, which is the cash price minus the futures’ price, is around 10 cents.

“This is a unique marketing opportunity,” Amosson said. “I checked the data back to 1976 and we have never had a positive basis for wheat at this time of year.

“The average for the previous five years is a negative 70 cents. I’m recommending producers go ahead and market any wheat they have on hand to capture this extremely strong basis. If they think prices are going to rise, they can re-own the wheat by buying the board or buying a call using the December contract. That will allow a producer to capture the extremely strong basis and remain in the market if they wish.”

Amosson said he believes this is happening because the supply pipeline for feed and other uses is basically empty.

“End users are scrambling for anything they can use and are willing to pay a premium,” he said. “I expect the basis to fall as the new crop corn, which is anticipated to be at a record level, gets harvested. I don’t think this marketing opportunity will be around much longer since corn harvest has already started in South Texas.”

Amosson said the same advice applies to any supplies of feed grains producers might have on hand. The current corn basis is around $1.45/bushel. That is approximately $1.30 to $1.40 above the normal basis for the region.

-30-