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Weekly Basis Review - Farmers resist lower cash markets

Soybean basis strengthened into USDA report; corn firm.

Last week’s late rally in soybeans following bullish news from USDA convinced more farmers to move some of their remaining inventory. That hit basis at some terminals. But overall bids continue to strengthen thanks to a strong export and processor market.

Record soybean sales and shipments kept basis from weakening sharply along much the river system despite higher shipping costs as ice slows traffic in some areas and fewer empties journey upstream. Bids from processors also improved as margins remain good. The National Oilseed Processors Association releases its survey of December usage Jan. 17, which could reflect lower extraction rates projected by USDA.

Average soybean basis improved around four cents into the USDA report, but remains much weaker than normal due to the record 2016 crop. Farmers have generally been more willing sellers of soybeans thanks to the post-harvest rally that took flat prices to profitable levels.

Corn basis also firmed last week, but the improvement on average was a penny or less. Basis at terminals is running around 8 cents weaker than average, with many country elevators showing even a bigger gap from normal.

The best gains last week came from the western Corn Belt, where basis typically takes longer to strengthen. Gains were also noted at ethanol plants, which raised bids 2 to 7 cents, with the most improvement seen west of the Mississippi. Plants are churning out record amounts of the biofuel, but stocks are building too, depressing operating margins.

Wheat basis was firm on average last week, but there were as many losers as gainers, and bids generally remain very weak thanks to excess supplies. USDA’s Jan. 12 reports aren’t likely to change that perception, despite historically low winter wheat seedings for harvest in 2017. The government raised its forecast of May 31 leftover supplies due to weaker seed and feed usage.

Spring wheat has been the only bright spot in the complex thanks to good demand, with Minneapolis futures surging to a series of seven-month highs last week. Dec. 1 stocks reported last week were up only 3% in North Dakota, reflecting the tighter supplies. But the gains on the board kept basis predictably from firming last week.

Sorghum basis weakened last week on average, with bids remaining very poor thanks to abundant supplies and lagging exports. Average basis levels for the feed grain are running 40 cents or more below than average, which could cause farmers to cut back on acreage again this spring.

Interactive versions of the national maps are available online. Go to: Corn BasisSoybean BasisWheat Basis and Sorghum Basis for more. Note that you may have to refresh the page to get all locations to display.

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More from Farm Futures:

Weekly Corn Review
Weekly Soybean Review
Weekly Wheat Review

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.

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