How to Mitigate Risk as COVID-19 Creates Fallout in Local Basis
Global markets are currently in a state of disruption due to the coronavirus, and in the grain market, supply and demand are indicating that the “basis” or “flow meter”, which helps to keep the market in stasis, needs to change, according to Landus Corporation.
This unsettling of the market will not correct itself quickly, and with continued uncertainty, it is important for farmers and stakeholders in the grain trade to create a plan to manage risk.
However, there have been other grain market situations driven by disease, which provide an example of what the fallout could look like. Landus cites the spread of African swine fever that decimated China’s hog herd, and impacted the soybean market. The fallout is also being seen in the ethanol industry as demand for gasoline has fallen by 65 percent since February, leading to large ethanol stockpiles and a drop in grinding of up to 35 percent.
In the following article Landus suggests asking two questions - the answers to which could offer direction when constructing a plan.
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