June 1, 2023

Corn Basis Implications from July-September Futures and Weather Conditions

by Nathanael Thompson

Corn and soybean basis has been relatively steady in recent weeks in most regions of the eastern Corn Belt. At the end of April James Mintert and I discussed the inversion in old crop corn futures contracts and the impact on basis and old crop marketing. See our conversation here. As anticipated, July ’22 corn futures have strengthened relative to September ’22 corn futures since the May ’22 corn futures contract went off the board. Corn basis has also remained very strong in many regions in the eastern Corn Belt. However, as we discussed in our conversation in April, attention now shifts to the July-September corn futures price spread, which has a strong inversion—September trading for $0.73/bu. less than July. How will this impact basis patterns for the remainder of the summer?

If we look at recent years with an inversion in the July-September corn futures spread, we find 2013—following the 2012 drought—and 2021—following increases in Chinese export demand. Looking at the basis patterns in these two years indicates that basis relative to July futures (Figure 1) will likely weaken in the coming weeks as we approach expiration of the July futures contract and basis relative to September futures is likely to remain strong (Figure 2).

Corn Basis, July Contract, Central Indiana, Purdue Crop Basis Tool

Figure 1. Corn Basis, July Contract, Central Indiana, Purdue Crop Basis Tool

Corn Basis, September Contract, Central Indiana, Purdue Crop Basis Tool

Figure 2. Corn Basis, September Contract, Central Indiana, Purdue Crop Basis Tool

However, weather in the coming weeks could impact both futures price spreads and basis patterns. If hot and dry conditions continue in the Midwest, we would expect to see the spread between July and September corn futures to narrow and basis to likely strengthen at locations that need corn this summer. However, if weather is favorable and crop conditions remain good, then this spread is likely to remain wide and basis will likely follow its seasonal pattern steadily weakening as we approach harvest in the Fall of 2023. Be sure to check out these basis patterns in your local market using the Purdue Center for Commercial Agriculture’s new and improved Crop Basis Tool.

TAGS:

TEAM LINKS:

RELATED RESOURCES

Corn & Soybean Basis Continue to Strengthen Despite Being Significantly Weaker than Historical Basis Levels

May 9, 2024

In recent weeks, corn basis has continued to strengthen steadily at many locations across the eastern Corn Belt. For example, corn basis in central Indiana for the second week of May was $0.22/bu. under July ’24 corn futures. This is $0.13/bu. stronger than the first week of March.

READ MORE

Corn & Soybean Basis Steady to Slightly Stronger Across the Eastern Corn Belt

April 11, 2024

In recent weeks, corn basis has been steady to slightly stronger across much of the eastern Corn Belt. For example, corn basis in central Indiana for the second week of April was $0.18/bu. under May ’24 corn futures.

READ MORE

Corn and Soybean Basis Continue to Steadily Strengthen at Most Eastern Corn Belt Locations

March 7, 2024

In recent weeks, many eastern Corn Belt locations have seen steady to slightly stronger corn and soybean basis levels. For example, corn basis in central Indiana for the first week of March was $0.24/bu. under May ’24 corn futures. This is $0.05/bu. stronger than the first week of February, but still about $0.18/bu. weaker than the historical 3-year average corn basis for the region.

READ MORE

UPCOMING EVENTS

We are taking a short break, but please plan to join us at one of our future programs that is a little farther in the future.

2024 Crop Cost and Return Guide

November 22, 2023

The Purdue Crop Cost and Return Guide offers farmers a resource to project financials for the coming cropping year. These are the March 2024 crop budget estimations for 2024.

READ MORE

(Part 2) Indiana Farmland Cash Rental Rates 2023 Update

August 7, 2023

Purdue ag economists Todd Kuethe, James Mintert and Michael Langemeier discuss cash rental rates for Indiana farmland in this, the second of two AgCast episodes discussing the 2023 Purdue Farmland Values and Cash Rents Survey results.

READ MORE

(Part 1) Indiana Farmland Values 2023 Update

August 6, 2023

Purdue ag economists Todd Kuethe, James Mintert and Michael Langemeier discuss Indiana farmland values on this, the first of two AgCast episodes discussing the 2023 Purdue Farmland Values and Cash Rents Survey results. Each June, the department of agricultural economics surveys knowledgeable professionals regarding Indiana’s farmland and cash rental market.

READ MORE