Comment Text:
I am a fourth generation farmer growing corn, wheat, soybeans, and beef cattle in central Kansas. Basis management has become an increasingly frustrating part of my marketing and a lack of convergence in several of these markets have created many issues over the past several years.
Wheat basis, in particular, at my local market has ranged over $1.10 per bushel over the last 14 months equating to 20-25% of the entire value of the crop. Without consistent convergence in commodity contracts, marketing strategies utilizing futures markets become unreliable, at best, as a tool for my farm.
Inconsistent convergence also creates huge problems in indemnity situations on my crop insurance policies. Widening negative basis not only creates havoc when trying to combine marketing strategies with revenue policies, but also creates situations where farmers are penalized by having more actual production.
I’m in favor of the hybrid VSR with an annual review period that would allow me to feel like this complicated system for determining the value of inventory is actually working to more closely reflect the issues affecting my farm's profitability. Basis at my local elevator should accurately reflect market conditions and convergence in futures contracts is vital to solving several major problems my farm realizes everyday.
