Basis remains the bright spot in an otherwise weak grain market that has farmers holding tight to newly harvested crops. End users enjoying good demand are having to boost bids to pry production out of storage.
Growers should watch for pushes in the corn market, where basis last week firmed to average or better levels in some locations. December-July carry in the futures market is still providing more than two cents a month net of interest for hedgers, so storage is still likely advantageous unless a buyer is squeezed.
Average corn basis at terminals firmed a penny and is less than two-cents weaker than average. Bids in the country strengthened even more thanks to better basis at ethanol plants forced to raise prices to maintain production despite margins that eroded again due to a weak ethanol market hurt by large stocks and slow off-season demand for blending with gasoline. Bids in areas with heavy livestock feeding in the Southeast and western Plains also followed the raises.
After a big surge this fall on strong corn shipments, basis in the export pipeline eased in some places as trade at the Gulf was down a penny. Weakness focused on lower stretches of the Mississippi River as shippers work to fill their last barges on upriver sections that will close at least by Dec. 15. Barge freight rates continue to weaken with traffic back to normal following a year filled with disruptions. The cost of shipping corn from the Illinois River to the Gulf fell another 3.5 cents, and is more than 40 cents lower than levels hit when flooding closed sections late in the summer.
Early season corn exports got a boost when shipments of soybeans to China dried up, but soybean basis continues to strengthen despite the trade dispute. To be sure, huge supplies and the tariffs created basis that is much weaker than normal. But bids have at least returned to last year’s levels in the export pipeline. Though lack of China business reduced demand off the PNW, rail bids moving west also held up last week.
Basis at soybean processors was mixed despite news than members of the National Oilseed Processors Associated set a record for October. Soybean crush margins traded to the lowest level in a year last week due to weak meal values and an oil market pressured by the weakness trade in Malaysian palm oil futuressince2009.Theplungeincrudeoilhitespeciallyhardonpalmoil’shopesforbiodieseldemand.
Average soybean basis strengthened six cents, but is running around 75 weaker than average. November-July carry went off the board around 51 cents, and January-July is still offering around 3.25 cents a month net of interest, giving incentive to hedgers to continue with bins locked tight.
That used to be the case in the wheat market, but not any more for soft red winter wheat. December-May carry in futures traded nearly 7 cents a month as recently as the end of October. But that carry is down to just 3.2 cents, 1.5 cents net of interest after basis in Toledo traded above futures. Just 10 lots are registered for delivery as first notice day nears at the end of the month. Reductions in the December- March spread mean the CBOT should lower storage charges at deliverable locations, which could lock in lower carries this winter. SRW basis weakened at the Gulf with weakening flowing up the Ohio River.
Basis for hard red winter wheat improved at the Gulf and off the PNW, giving a boost to that end of the cash market. Spring wheat remains the class most in demand after poor harvests in northern Europe, firming basis in Minneapolis to average levels. White wheat is also strong off the PNW thanks to demand boosted by the drought in Australia.
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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