If you are holding onto grain to sell before harvest, you may have checked cash bids and got a big surprise. The basis level dropped like a stone. Why is that happening? Jim McCormick with AgMarket.Net says when it comes to the basis, we have seen farmers that have held on to old crop grains, and now they may pay the price for waiting too long.

“There are two things. Unfortunately, there are some producers out there that held on the grain a little bit too long. I mean, you’re looking at, you know, that carryout from last year’s crop, 1.4 billion or so, getting rolled forward. So, some of that is now hitting the market where people held on too long. Not to mention harvest is really starting to pick up. They’re harvesting pretty aggressive. We heard certain parts down near St. Louis and Illinois, a lot of guys are anticipating the heat to build early next week. This heat and dryness are bringing the current crop on strong. So, you’ve got roughly, think about it, about 16 billion bushels of corn we’re going to start gathering combined with old crop and harvest, so the basis is going to freefall. If you’re a producer out there, and you have some grain that you need to move, you’re probably better off moving it sooner than later because I would anticipate that basis to weaken a little bit more as we move into to the heavy portion of harvest.”

Exacerbating the issues with the grain markets is the intense heat in the second half of August and into early September. That is causing the crops to not “dry down” but “die down”. That means we are losing bushels as the crop nears harvest. This means we could see harvest moving fast and way ahead of schedule.

And in the Midwest, couple that with low water in our shipping lanes of the Mississippi and the Panama Canal, and it could spell trouble.

“Not just in Iowa but around the Midwest, especially here in Illinois, this crop is not drying down in the corn. It is dying down. It is going from alive to dead in 10 to 15 days. And we do know when that happens, you are leaving bushels on the ground or in the air because you’re not having that moisture. So, this is going to be a very fast harvest. It’s going to kind of set us up for kind of an interesting situation because the other storyline we’re kind of keep an eye on with this lack of rain is the Mississippi River levels. Those water levels are falling freight rates are spiking, and that could become a problem because we are way behind our export sales base. We’re just getting competitively priced. And now, all of a sudden, the freight to get that product from the Midwest down to the Gulf is spiking. But then we got a secondary problem. They’ve actually got a drought going on in Panama, believe it or not, and the Panama Canal is running low on water. So, they’re not shipping as many boats, and the boats that are going through are paying a premium. And it’s costing as much as $10 a ton above and beyond just to pay for this short water premium.”