While run off from heavy spring rains continues to pose problems along the nation’s river system, growers selling corn may soon have to worry about another type of flood. Leftover supplies from the record 2016 harvest could depress the cash market this summer, especially if futures are able to muster a rally.
Farmers remain rather slow sellers, which is helping to firm basis a little. Though bids remain weaker than normal across the U.S., average basis strengthened a penny or so. Where the market moved – and where it didn’t – speak volumes about the problems farmers with unpriced inventory may face.
Farmers traditionally hang on to part of their crop into the growing season as a hedge against lower income from poor yields. Basis firmed in areas suffering saturation like Kansas, where average basis improved by a nickel or more. Missouri and the eastern Corn Belt generally saw better basis. Bids were stronger too on the lower Mississippi River, where floodwaters are still rising.
But where the crop was planted quicker than normal, like the northwestern part of the growing region, basis slumped. Average bids in South Dakota weakened by a penny.
Ethanol plants generally appeared to be buying. After record production in April swelled biofuel inventories, plants cut back. That’s helped reduce inventories, firming prices and profit margins, letting plants bids up a little more.
Growers looking to book some new crop basis may have to wait. Though the 2017 crop could be a billion bushels smaller, shippers don’t appear worried about finding supplies. A weak new crop export lineup for both corn and soybeans has new crop corn basis along the Illinois River trading 30 under, even weaker than it was in the fall of 2016. Barge freight rates for harvest slots are a lot cheaper than normal, which could eventually improve those bids if the costs hold.
Soybean basis also firmed this week. But the gains didn’t come in the export pipeline, where weaker basis at the Gulf flowed upriver. Rail basis firmed in the western part of the growing region, and processors were also buyers.
Wheat exports are finally picking up a little, but the arrival of harvest in Texas has weakened bids at the Gulf. Rail bids were mostly better, because basis improved off the PNW. Basis for soft red winter wheat was also stronger on the river system and up to Chicago and Toledo, as buyers may be getting nervous about quality after heavy spring rains.
The rains in Kansas that firmed corn basis also have a lift to sorghum bids. But basis in the export pipeline was weaker, as Chinese demand remains mediocre.
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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.