Average grain elevator margins are expected to be relatively normal this year for most of the Midwest. However, according to a new report from CoBank’, elevators should be cautious about the outlook, as several variables, such as trade issues, could affect elevator margins.
Corn and wheat margins look solid on good carry and expected basis improvement, although corn ownership may be difficult for some elevators to obtain. Soybean margins for the year ahead face some uncertainties. Elevators are confident they will make a margin, but the question is when. Trade, logistics and export competitor production will be major factors impacting margins going forward. A CoBank economist says soybean basis appreciation will face resistance over the next year as “ample supplies and weak demand will continue to hobble the market.”
Farmers will opt to store the crop as elevators seek to purchase it. Corn basis remains relatively strong considering the large crop, thanks to strong domestic demand. Ethanol use is expected to increase year-over-year, and feed demand will remain robust as cattle, hog and poultry numbers continue to increase. Amid this strong demand, elevators will likely see strong basis appreciation this year.