Back to School With Marketing Guru Ed Usset #37

I like to tell producers about the “11th Commandment” of grain marketing, “Thou shall not hold unpriced corn or soybeans in storage after July 1.” What is the driving force behind this commandment?

  1. a. the tendency of basis to weaken from early summer to harvest
  2. b. the tendency for new crop futures to decline from early summer to harvest
  3. c. both (a) and (b)

 

Answer (c): While there are exceptions, the tendency for cash grain prices to decline from early summer to harvest is very strong. This due to the fact that two powerful forces are working against the value of cash grain: (1) the tendency for cash prices to fall relative to futures prices and, (2) the tendency for new crop futures to trend lower.

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