Futures prices may be down in the dumps. But corn growers with hedges on or looking to lock in basis contracts should be watching for pushes, with basis firming in parts of the cash market last week.
While there was still more than a foot of ice over Lake Pepin last week downstream from the Twin Cities, movement is beginning on other stretches further south. Work on locks is scheduled to be completed next week, with freight in the secondary market being offered again.
Freight costs to ship corn to the Gulf eased a little last week, firming river bids more than a nickel in some locations along the Mid-Mississippi. Shipments remain strong, so there will be plenty of barges that need filling in coming weeks.
While average basis levels at terminals is weaker than normal, the market is strengthening as farmers with adequate cash flow resist selling. Margins at ethanol plants remain decent, and bids in that part of the sector also firmed last week. Production was down last week only slightly, according to government data out Thursday morning.
Corn basis remains rockier in the west, where it typically takes longer to strengthen. Compounding that seasonal trend are transportation problems caused by terrible weather on the West Coast that increased rail charges. Basis firmed off the PNW because supplies are tight. Delays have even spurred talk that Japan and other short-bought Asian importers my turn to China for some last-minute fill-in supplies. China used to export corn into the region, and has a huge surplus to get rid of.
Soybean basis appeared headed in the other direction from corn, with average basis levels flat to a little weaker. Though processor basis in the eastern Midwest held up on decent margins, basis in the export pipeline was generally weaker despite the start to shipments on the Mid-Miss. The selling season is starting to wind down, and supplies are still burdensome as demand from exporters shifts to South America in coming months.
Wheat basis was better by a penny or so on average, but most of that strength appeared to come in spring wheat and soft red winter wheat markets. Tight supplies and stronger demand for high protein wheat are keeping that market popping. Exports of soft red winter wheat are poor, but large carries could be encouraging some with inventory to just hedge it, keeping the grain off the market and forcing basis to strengthen.
With hard red wheat basis weak, sorghum basis also came under pressure, slipping last week after a modest rally since the first of the year. Cash sorghum remains at a large discount, due to limited export demand and large alternative feed supplies.
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Senior Market Analyst Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.