Premium Cash Markets Heat Up

The premium bids continue to climb across the country with a couple locations now posting a +60Z for spot delivery. On average across the US we saw spot corn rise three cents driven by an improvement in average ethanol basis and strong bids by processors. The river locations bucked the trend and closed the week ending Thursday lower by four cents.

Average ethanol basis has been rising since the beginning of August, while the average basis for river facilities has dropped off significantly. This weakness along the river has kept domestic grain processors, feeders and ethanol plants competitive resulting in much of the remaining old crop grain staying inland.

However, when you look at the cash forward curve for ethanol prices compared to river prices you will notice the strength for ethanol is only in the spot market. While the river has a weaker spot price, it actually has much more competitive forward prices for harvest and beyond.

This would imply that while on average it is better to sell any un-priced old crop to an ethanol facility, you might want to look toward the river markets to forward contract any new crop grain. Despite Ethanol’s softer prices in the forward months, we expect ethanol to continue to be a strong competitor in the spot market.

Finally, you will notice a red line around the $8.60 price level. This represents the strongest publicly posted prices for spot, September, October and November delivery. This is a perfect example of how important it is to monitor your regional basis. In this case, the difference between an average ethanol sale and the best basis in the country is roughly 60 cents.