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“Since the river reached its lowest point in October, we’ve seen basis recover a great deal,” Hunter Biram, extension economist for the University of Arkansas System Division of Agriculture, said on Tuesday.
By Mary HightowerU of A System Division of Agriculture
Nov. 16, 2022
Fast facts:
(597 words)
(Newsrooms: With sidebar ark-farm-enterprise-budgets; with filer of Hunter Biram and file art of barges https://flic.kr/s/aHsmVHjrri
LITTLE ROCK — As rain feeds the Mississippi, the rising river is also buoying the commodity prices farmers are receiving at the elevators.
Months of drought throughout the Mississippi River basin dropped the river to record low levels in October; bottlenecking — and at one point halting — barge traffic between Osceola, Arkansas, and Greenville, Mississippi. With nowhere to go, corn, soybeans and other commodities piled up at the elevators. Shipping prices rose, as did the commodity backlog, which translated into lower prices for farmers.
“Since the river reached its lowest point in October, we’ve seen basis recover a great deal,” Hunter Biram, extension economist for the University of Arkansas System Division of Agriculture, said on Tuesday. “Basis” is the difference between the local cash price the futures price for a particular commodity.
“It’s gone from about 80 cents under to 40 percent over the futures price. That’s a 120-cent recovery,” Biram said. “At Helena, it went from 70 cents under to 40 over. That’s a 110-cent recovery.”
Normally, “45 cents would be a big deal, especially with commodity prices,” he said.
Are farmers breathing a sigh of relief?
“If I was a farmer, I would,” he said.
Biram said there were three factors moving the rise in prices. First, was the resumption of barge traffic. Second would be “an indirect effect of the barges moving — those grain stocks that built up at the elevator are being depleted. Those stocks are coming down, and the cash price is increasing.
“The third thing is that during this time of year, basis is strengthening anyway because we are in a post-harvest state,” he said. “Normally, in September and October you see basis weakening because of high stocks. A lot of farmers are going to be delivering grain as they harvest it.”
Fertilizer for spring
The Mississippi River is also an important avenue for the fertilizer that farmers will use for planting next spring. The good news is that overall prices are expected be lower than this year’s, according to the enterprise budgets for 2023 being developed by the Cooperative Extension Service. These budgets help farmers plan for their next growing season.
“Overall fertilizer is about 3 percent lower comparing 2023 with the 2022 enterprise budgets that were adjusted earlier this year because of the war in Ukraine, Biram said.
“Nitrogen is looking 6 percent lower, phosphorus about 2 percent higher and potash is looking constant,” he said, adding that the moderation in prices is likely due not only to barge traffic moving again, but also that the markets don’t see the war the same way.
“Last year it was a shock. It’s not a shock now. Like COVID, we didn’t know what to do with the supply chain issues, but now we’ve adjusted,” he said.
Crop insurance
The Risk Management Agency, or RMA, of the U.S. Department of Agriculture has also completed its harvest-time price discovery, which is used to determine indemnity for farmers.
RMA determines its payments through two rounds of price discovery. The first is examining futures prices from mid-January to mid-February. The second round is done during harvest.
“I’m not expecting to see too many Revenue Protection indemnities paid for corn, soybeans and rice, unless the farmer experienced huge production losses,” Biram said. In short, as futures prices increased through the season, “the lower your chance of receiving a Revenue Protection indemnity payment.”
The exception may be for cotton growers. Biram said the projected futures price was pegged at $1.02 per pound in February, but that the harvest price is 81 cents.
With a 21 percent fall between the RMA-determined projected and harvest prices for cotton, those enrolled in STAX — the RMA’s Stacked Incoming Protection Plan — may receive indemnity payments, he said.
River gauges
Links to National Weather Service river forecast graphs for relevant lower Mississippi River gauges:
To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit www.uaex.uada.edu. Follow us on Twitter and Instagram at @AR_Extension. To learn more about Division of Agriculture research, visit the Arkansas Agricultural Experiment Station website: https://aaes.uada.edu. Follow on Twitter at @ArkAgResearch. To learn more about the Division of Agriculture, visit https://uada.edu/. Follow us on Twitter at @AgInArk.About the Division of Agriculture
The University of Arkansas System Division of Agriculture’s mission is to strengthen agriculture, communities, and families by connecting trusted research to the adoption of best practices. Through the Agricultural Experiment Station and the Cooperative Extension Service, the Division of Agriculture conducts research and extension work within the nation’s historic land grant education system.
The Division of Agriculture is one of 20 entities within the University of Arkansas System. It has offices in all 75 counties in Arkansas and faculty on five system campuses.
The University of Arkansas System Division of Agriculture offers all its Extension and Research programs and services without regard to race, color, sex, gender identity, sexual orientation, national origin, religion, age, disability, marital or veteran status, genetic information, or any other legally protected status, and is an Affirmative Action/Equal Opportunity Employer.
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Media contact: Mary Hightowermhightower@uada.edu