High grain ending stocks will keep basis wide

ST. JEAN BAPTISTE, Man. — Farmers who are waiting for poor prairie basis levels to make significant im-provements might be waiting a long time, says CWB analyst Bruce Burnett.

Gaping basis levels might last through 2014-15 because the crop surplus isn’t going away any time soon.

“If we produce an average or reasonable-sized crop (in 2014), we’re still going to be dealing with some fairly high inventory levels,” Burnett told St. Jean Farm Days Jan. 9.

“We produced a crop-and-a-half that was approximately 20 million tonnes higher and we’re going to bite into it from an export side by about three million tonnes.”

Burnett said 2013-14 ending stocks will be the largest since 1978-79 and 2014-15 ending stocks could be the second largest if anything like a normal crop is produced this year.

It would force the logistics system to move much more than it’s designed for, with no need for elevators to entice grain sales from farmers.

Burnett said the prairie grain handling system from the start of the crop year until Christmas moved 1.2 million tonnes more than it did in the same period last year. If that pace continues, by the end of the crop year the system is expected to exceed last year’s movement by three to 3.5 million tonnes.

That won’t put much of a dent in the extra 20 million tonnes that were produced, so ending stocks will soar and will have to be transported in 2014-15.

It’s why he recommends farmers lock in 2014-15 delivery opportunities, even with terrible basis levels.

“Some of the things you’re used to … are going to change dramatically. Especially if you have winter wheat and you think it’s going to be hauled directly off the combine this year. Unless you have it booked already, you’re probably not going to have that happen,” said Burnett.

“Start getting some logistics capacity by booking some slots out there. You might not like the prices, but generally, unless we get a weather event happening here that’s going to hurt some production somewhere, that’s where we’re headed.”

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