Grain Elevator Outlook: Tight Basis Squeezes Grain and Oilseed Margins

December 2019 - Tanner Ehmke

 

Key Points

  • Grain elevators are expected to have slimmer margins YoY from buying sharply higher basis on corn, soybeans, and wheat.
  • Revenues will also be stressed for elevators as they incentivize farmers to sell by offering discounts on storage, free delayed pricing, or free grain drying. 
  • Grain quality issues from high moisture problems at harvest and frost damage on immature fall crops will raise management costs for elevators and potentially result in greater losses to shrinkage and spoilage.
  • Futures carries on corn and soybeans have been trending higher in recent months; however, carries are markedly smaller than last year, especially for wheat.
  • While grain elevator margins generally are expected to be down in the year ahead, grain handlers can profit from blending new-crop supplies with existing old-crop inventories, and those with reliable access to propane can profit from drying grain.

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