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Serving: United States
BargeOnRiver Ron Chapple Stock/ThinkstockPhotos
Aerial of barge on Mississippi River in Baton Rouge, Louisiana.

Basis Outlook - River opens, but problems linger

Corn basis fades as rally brings bushels to town.

Traffic is moving again on most of the Mississippi River, but conditions are a far cry from being anywhere close to normal. High water continues to restrict the number of barges tows can handle. Some areas will remain flooded until next month at least. And heavy rains could close the system again, perhaps as soon as this weekend.

In the midst of the turmoil, basis in the cash market was mixed as futures prices – and farmers – reacted to rallies caused by weather and pondered potential impacts on demand from the lingering U.S.-China trade war.

Lack of barge movement down the river system this spring depleted supplies at the Gulf, boosting prices for corn, soybeans and wheat. But that strength flowed as unevenly as the torrent of water rushing downstream.

Corn bids, for example, firmed on some lower portions of the Mississippi. But basis at most terminals from Memphis to Minneapolis weakened, as did bids on the Illinois and Ohio rivers. Areas feeding terminals also faded, given an additional nudge to the downside by margins at ethanol plants that deteriorated due to higher feedstock costs, causing basis at these processors to lose ground as well.

But average basis was firm, thanks to stronger bids in the western Corn Belt aided by strength off the Pacific Northwest despite rising rail costs. End users absorbed that expense, using cars to move grain not only west but down to the Gulf as well, with shipments to Mexico also remaining strong. Initial quotes for fall rail freight suggest costs will be on par with those for the last four years. Fall barge rates by contrast look near some of the highest levels seen since the spike in 2014.

While higher prices gave farmers an incentive to start moving a little of their big old crop corn inventories, futures gains were modest for soybeans. Farmers also have sold more soybeans than corn, leaving the beans in the strong hands of hedgers hoping to force buyers to push basis. That effort succeeded last week: Average basis strengthened four to six cents, led by big gains at processors. Crush margins remain positive, even though members of the National Oilseed Processors Association used a little less than expected in April according to their report put out last week.

Strength was also seen on parts of the Upper Mississippi River where shippers will begin dealing with the backlog of sales. Unshipped exports are running at record levels, though more than half the outstanding amount belongs to Chinese buyers, whose plans remain very uncertain. Other customers are likely to continue buying from the U.S. because prices out of the Gulf ended last week at a 6% discount to Brazil.

Basis for wheat was mixed as the marketing year winds down to its end May 31. Bids for soft red winter wheat were weak over much of the growing region for that class. Though production could be off for 2019, demand remains muted with big importers like Egypt focusing on local supplies.

Hard red winter wheat bids strengthened with an uptick in demand and perhaps some concerns about a later than normal harvest. Spring wheat was mixed despite stronger prices off the PNW, while white weak eased as forecasts for Australian production remain good despite a shift back to hotter and drier weather.

Farmers planted less wheat on the southern Plains this year, and corn areas could also be less than intentions due to wet conditions. That could cause some growers to plant sorghum. Bids for that feed grain weakened in Kansas though basis showed some strength to the south.


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.

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