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Corn basis feels harvest pressure

Agriculture.com Staff 11/06/2008 @ 7:28am

Corn basis was generally weaker this week, as harvest tended to pick up pace in the Upper Midwest and the Western Corn Belt. For the week, corn basis drifted lower by 2 cents a bushel while soybeans were 2 cents higher.

Corn basis was mostly stronger in the Eastern Corn Belt where farmers are on the back-end of harvest. In the Western Corn Belt and Upper Midwest, farmers are in the thick of harvest and pressure is starting to hit basis levels. Furthermore, the pick-up in harvest is sending barge rates higher, which took its toll on both bean and corn basis this week. On the Illinois River, Barge rates were up as much as 30 cents a bushel before giving back their gains today.

Soybeans saw a better week as harvest is much further along and in some parts of the country harvest is nearly completed. Basis was mostly stronger for basis, with the only notable exception occurring along the river systems where higher barge rates took a bite of bean basis levels. River terminals dropped bean basis 10 to 20 cents a bushel over the last week in the face of escalating barge costs.

The good news is once we get past harvest, barge rates will come down substantially which should lift basis levels around key river markets. We would expect basis levels to improve 30 to 40 cents a bushel over the next few months as barge rates start to return to normal.

For corn, the wildcard in basis is ethanol buying patterns. This week's announcement of Verasun seeking bankruptcy protection might be a sign that the industry is due for some tough times. So far, Verasun plants have not adjusted their basis levels on corn to reflect a more stringent appetite for corn, but they are limiting their forward contract offerings. Corn basis levels should hold up well as lower transportation costs and farmer storing in the face of futures losses should keep basis strong for the near future.

Corn basis was generally weaker this week, as harvest tended to pick up pace in the Upper Midwest and the Western Corn Belt. For the week, corn basis drifted lower by 2 cents a bushel while soybeans were 2 cents higher.

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