Farmers who took advantage of historically narrow basis levels by using a basis fixed contract are feeling a pinch as the May futures get closer to first notice day. There is some concern that May basis contracts could go inverted, because of the corn futures working against them. Each grain elevator has its own rules on how to handle those contracts. “There are certain facilities out there that will not allow customers to roll a basis contract. That means they’re going to have to prices at these lower futures levels. There’s also places that do allow a roll, but right now the carry has widened out,” explained Angie Setzer, vice president, Citizens Elevator, LLC. “This will cost the producer money to roll it out to July and capture a few more months of upside potential.” Setzer said the grain elevator is holding all the cards. “They have the ownership of the corn. The risk isn’t there necessarily for the futures side. It depends on the elevator’s structure,” said Setzer. “When I sell grain to an end user, I take a long futures position that’s typically offset when a farmer makes a sale. That’s where the cost of the roll comes in. If you don’t, you’ll take a hit at the elevator.”
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