With prices well below break-even levels, record corn and soybean yields may be little solace for many farmers as harvest gets underway. Though bumper crops lower the cost of production per bushel, they’ll also challenge storage capacity in many areas, weakening basis in what’s already a depressed cash market.
Nationwide, around 98% of available storage could be filled by this year’s crops, when added to stocks of other grains still on hand. But some states will produce far more than those bins can hold. Fields in Nebraska could generate 180 million more bushels of corn and soybeans than they did in 2017. In South Dakota, nearly 150 million more bushels will need a home. Both states will reach 20% or more of available storage capacity.
Kentucky also faces a storage crunch, one reason Louisville corn basis has weakened 40 cents, with soybean basis nearly 80 cents lower. The weakness spilled over to wheat as well, as merchandisers try to make room for what’s coming next.
Illinois also faces a challenge due to what look like huge crops according to USDA, with corn and soybean output 225 million bushels more than a year ago.
States hit by drought like Missouri could have room to spare. That has corn basis trading stronger than last year’s harvest levels. But it hasn’t done anything to help soybean bids pressured by record production nationwide.
Indeed, soybean basis weakened sharply last week, losing six to nine cents a bushel on average. Bids were down sharply in the export pipeline despite a drop in barge freight costs as traffic got back to normal levels. Bids from processors also were mostly weaker.
Basis was also weak on much of the river system for corn, one reason terminal bids weakened seven cents on average. Basis was also weaker at ethanol plants after prices for the biofuel plunged to their lowest level in more than a decade, hurting margins. But overall basis in the country weakened only two cents, while bids for sorghum were steady on average despite slow exports due to lack of Chinese business.
Big carries in the futures market to July – 49 cents for soybeans and 26.5 cents for corn – could make storage hedges attractive for farmers who can roll new crop hedges already on the books to capture basis appreciation. Lower rail costs this year could also make a difference for those in the western Midwest.
Wheat exports are also off to a slow start. But better bids for hard red winter wheat off the PNW and Texas Gulf improved basis at terminals and in the country on the Plains, though soft red winter wheat cash was weaker mostly.
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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