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Basis holds firm in the face of futures rally

Agriculture.com Staff 02/21/2008 @ 10:55am

Skyrocketing futures prices over the past week were met with modestly higher basis levels. Gains of 23 cents in corn and nearly 80 cents in soybean futures in the past week were impressive, but perhaps more impressive is the strong underlying support in the cash market.

Generally, large upswings in futures will be met with heavy cash selling and weaker basis. This past week however saw both corn and soybean basis levels up slightly more than one cent per bushel.

In corn, Western Corn Belt regions and areas tied to the river system had stronger basis gains. Gulf basis was up over 10 cents a bushel in the past week, pushed higher by strong export business. With domestic end-users and exporters trying to lock-in corn, the winner in this battle seems to be the U.S. farmer who still holds old-crop inventories.

For soybeans, basis gains were also stronger in the Western Corn Belt regions, but limited gains at the Gulf helped keep bean basis in check. Upper Midwest regions and the Eastern seaboard had some softness in basis over the past week.

Skyrocketing futures prices over the past week were met with modestly higher basis levels. Gains of 23 cents in corn and nearly 80 cents in soybean futures in the past week were impressive, but perhaps more impressive is the strong underlying support in the cash market.

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