Keep On Trucking
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December corn futures have traded sideways, within a fairly tight 6 cent range, for the past two weeks. Exports are proceeding well, with this week's export numbers coming in at 42.5 million bushels, beating trade expectations of 30 to 35 million bushels. However, with the USDA's most recent increase in production numbers corn stocks are slated to be 2.2 billion bushels. This will push the 05/06 stocks-to-use ratio above 20%. This is marginally higher than last year and 10% higher than two years ago. A high stocks to use ratio indicates excess supply and it is usually a good predictor of low futures prices. Barge traffic down the Mississippi is rapidly increasing as soybean harvest comes to an end and the corn harvest gets well underway. Corn harvest numbers are expected to be 45%-50% complete with the release of tonight's USDA crop report. This year's record harvest, combined with low water levels and the lingering effects of Hurricane Katrina is leading to exceptionally high barge rates. Barge rates are up more than 40% since last month, with 15% of that increase occuring just last week. Basis is being suppressed by the current environment of excess supply and high transportation costs. Basis was down or unchanged at many of the key corn markets accross the country. Several of the Iowa markets listed below saw basis drop 1 to 2 cents this week. There was some variability in basis accross Illinois and Indiana. East St. Louis and Evansville to the South gained 8 and 9 cents while Mendota in the North dropped 9 cents. Basis at the Gulf reacted favorably to the current export conditions, averaging 63 cents this week, up nearly 20 cents from the previous week.
Corn prices are consistently low across the midwest, but the regional variability in basis can create some opportunities to truck grain. The table below lists average profit from trucking to several key markets. These premium markets tend to offer prices that are high enough that producers in surrounding areas can truck their grain to these key markets rather than their home markets and earn a positive return after paying current trucking rates of 28 cents per 100 miles. This month in fact, as basis differences between key markets and country elevators widen, profitable trucking opportunities are appearing even further away from these key markets. Grain is being trucked 20 to 30 miles further this month than last. In some cases these key markets draw grain from weak basis areas as far as 100 miles away.
The above numbers are merely averages to give you an idea of current trucking opportunities. To maximize your profit, keep an eye on basis in your local area, but remember that you may be able to find a profitable trucking opportunity far from home. Even gaining a penny or two on your cash sales will make the extra research worth while.
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