Silver linings are hard to find when futures prices collapse as they have in June. And even the one bright spot in a bearish market was tarnished a bit as buyers pressured sellers nonetheless.
Basis for corn, soybeans and wheat all strengthened last week. That’s not unusual in a down market that typically convinces farmers to hold crops off the market, forcing buyers to raise their bids to attract inventory.
But a sign of just how weak the market is can be seen in the dynamics of the trade. Yes, basis strengthened. Still, gains would likely have been even better if the market weren’t awash in supply.
Take what happened on the river system. Barge freight values dropped from their highest levels since harvest as the shipping season began to wind down. The cost of shipping corn down the Illinois River to the Gulf fell by 10 cents a bushel. Yet corn basis on the waterway strengthened only a nickel, so just half the lower transportation costs were passed on to farmers.
The situation at ethanol plans was even worse. Though prices plants received for DDGSs plummeted in the wake of the downturn in soybean meal and trade war tensions with China, ethanol prices firmed. Yet even though corn was cheap in the cash market, plants weakened basis, lowering feedstock costs more and boosting margins.
Average corn basis firmed only around a penny as buyers likely are also waiting for a flood of corn this summer if new crop conditions stay strong. The weakest bids came in the eastern Midwest and on southern parts of the Mississippi River.
Soybean basis strengthened three cents at terminals and two cents overall, though producers selling into the much of the mid-to upper river system captured all of the lower barge costs. Basis was mixed at processors, who continue to enjoy strong margins due to increased exports triggered by the drought in Argentina, the world’s largest product exporter. In the country, basis also strengthened in dry areas from Missouri into western Illinois.
Lower hard red winter wheat yields on the southern Plains sent basis across much of the region sharply higher, despite exports that remain sluggish. Spring wheat basis from Minneapolis to the West Coast also strengthened modestly as July futures fell to the lowest level in more than a year.
Sorghum basis showed only a slight improvement, thanks to an export market still crimped by China’s absence. That situation isn’t likely to get better sooner unless the trade atmosphere improves.
The interactive maps below show how basis fared around the country. Click the box in the upper left-hand corner of the map to bring up the legend, and to turn features show on or off.
Download a complete version of the outlook with extensive charts and analysis using the Download button at the end of this report.
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 Advisor. 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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