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Serving: United States
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Aerial of barge on Mississippi River in Baton Rouge, Louisiana.

Basis Outlook - Basis surge is pricing opportunity

Short crop fears and river market boom make cash king

Farmers who kept bin doors sealed tight waiting for higher prices are finally in the drivers’ seat. That’s especially true in the corn market where growers benefited from both strong basis and higher futures prices last week, a two-fer that’s hard to come by during summer rallies.

But an unusual combination of events has end users scrambling to obtain supplies, from one end of the Corn Belt to the other.

In the east, both growers and users fear lower yields that could make corn hard to come by in coming months. Toledo corn basis is a full 25 cents a bushel stronger than average because Ohio was especially hard-hit by wet weather this spring. Now parts of the state are drying out, fueling fears 90-degree heat could be further hurting yield potential.

In the middle of the Midwest, the export pipeline is humming, with a flotilla of empty barges moving up the Mississippi River. While corn export demand has been lackluster, there are still tows that must be loaded, with terminals wondering if they’ll be able to refill their space in coming months.

In the western Corn Belt, bids eased in some livestock areas. But good demand off the Pacific Northwest kept rail terminals hopping. And ethanol plants were also buying, despite weaker margins, as they struggled to keep facilities pumping out fuel in the face of higher corn feedstock costs.

Average corn basis strengthened nearly three cents a bushel last week, with bids firming even on Friday’s rally.

Soybean basis also tightened nicely last with, improving nearly a nickel on average. With shippers trying to fill a record book of outstanding sales, basis just about everywhere that can berth a ship improved. That also help sellers into rail terminals feeding those ports.

Processors also boosted bids, incentivized by crush margins that remain profitable as well.

Sorghum basis followed the trend in corn and soybeans, but wheat was the odd man out. Harvest pressure and tepid export demand combined to pressure bids, which were notably weaker for soft red winter wheat, despite what appears to be a relatively small crop. Hard red winter wheat basis was able to firm in a few areas, mostly near rail terminals.

Exporters face another potential challenge in some markets this year due to a big move in ocean shipping costs. The Baltic Dry Index hit a five-and-a-half-year high last week, lifted by a surge in demand for iron ore.

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.

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.

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