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Basis Outlook - Cash market fears more than one flood

What will happen to basis if farmers start dumping corn?

An already harsh winter went from bad to worse across much of the Plains and Midwest last week, sparking blizzards, floods, tornadoes and hurricane force winds. With transportation snarling movement of grain, there were winners and losers among farmers trying to get rid of old crop inventories.

Corn basis was steady to a little stronger, but that average disguised bids that were all over the board. Barge freight rates actually eased on parts of the river system, allowing shippers to raise bids a little from St. Louis to Clinton, Iowa. But to the south basis went the other way, in some cases dramatically. Cairo, Illinois at the confluence of the Ohio and Mississippi weakened 11 cents and the market to the south was also weaker. The number of barges unloading at the Gulf dropped to the lowest level since June 2017.

Major flooding is expected early this week as far north as New Boston, Illinois with parts of the Mississippi River flooded as far south as Baton Rouge. While a little traffic was moving last week, locks started closing over the weekend, with more expected to be shut this week. Ice is still a factor on the Upper Mississippi – Lake Pepin south of the Twin Cities reported 22 inches last week, with heavy water flows to the south.

Reduced tow sizes and limited daylight running times are further restricting traffic on the lower Mississippi. Traffic continues to clear the backlog of tows on the Ohio River, though some are still waiting a couple of days to make it through the last locks before the Mississippi.

High winds, snow and flooding kept most elevators from bothering to seek sellers, with basis in much of the western Corn Belt steady to weaker as a result. But the big winners were farmers selling to ethanol plants, who depend on a steady flow of grain to keep running. Their bids were up sharply across the Midwest.

The soybean cash market followed a similar logic last week. Cairo basis weakened 15 cents but up river the news was more positive. Shippers on open stretches tried to move as much as they could and even those along the Upper Mississippi raised bids to make sure they had enough to fill barges when spring finally arrives. A large book of unshipped sales and slow movement this winter to the Gulf should help strengthen basis at least some, though it remains below normal due to large overall supplies.

Basis at processors was also mixed, with some plants pushing and other passing. Margins remain good but weaker than expected February crush reported Friday by members of the National Oilseed Processors Association was perhaps the first hint that the product boom caused by the poor crop in Argentina last year is beginning to fade.

Wheat was again a tale of two markets, hard and soft. SRW weakened over much of the Midwest from Missouri to Toledo, with bids easing at the Gulf as well. But basis for hard red winter and spring wheat firmed in the export market, helping the rail market down to Texas Gulf and PNW. Registrations and deliveries dried up in Kansas and Minneapolis at the end of the cycle for delivery against March.

Though sorghum basis remains weaker than normal bids of that feed grain firmed as well on average. Hopes for purchases by China continue to give the market the optimism the worst is over.

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 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.

For more corn, wheat and soy news, commodity marketing recommendations and daily commodity charts, subscribe to Farm Futures' free e-newsletter, Farm Futures Daily, and keep up during the day with Farm Futures on Twitter.

TAGS: Outlook Corn
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