“If that is the case, basis levels should be expected to collapse whenever producers give up and move old crop stocks in preparation for harvest of a large crop. Alternatively, the long period of strong basis may reflect a higher rate of feed and residual use than has been revealed to date and the cash market’s expectation of much tighter year-ending stocks. If that is the case, a strong basis may persist through the end of the marketing year. The question boils down to which market, cash or futures, has better anticipated consumption and ending stocks.” Good said.
Price behavior after the May contract expires next week may provide some clues about the correct scenario. The June 1 stocks estimate will be more revealing and will provide for a more accurate forecast of year-ending stocks.