Corn, soybean cash basis nearly unchanged in the last month
Corn basis has been mostly unchanged over the past month. In Minnesota, Iowa and Indiana, basis was down a penny from last month. But, basis currently is at or near last year's levels at this time. Other major corn states saw basis improve just slightly. A gain of 3 cents was seen in Illinois. Missouri gained 2 cents and Kansas corn basis was up a penny. The current basis in Minnesota and Wisconsin is still off from last year's basis by 10 to 20 cents.
Looking at recent basis changes, it appears that basis continues to move sideways at many key markets. Basis was a mixed bag in Iowa this week with several key locations raising basis 2 to 4 cents, while other facilities lowered basis by the same amount. Key markets in Illinois and Iowa were all either unchanged or higher this week. Pekin, Illinois and Burns Harbor, Indiana saw basis narrow by 6 cents.
Strong corn demand and limited farmer selling continued to provide support to corn basis this week. Export inspections were at 29.79 million bushels this week, down from analysts expectations of 36-42 million bushels. Despite a down week, exports are still progressing at a rapid pace. Cumulative shipments are now at 48% of the USDA forecast for the year, compared to a 5 year average of 38.6%. It seems likely that the USDA will increase exports forecasts again, lowering ending stocks.
Soybean basis has narrowed over the past month, gaining a few more cents than corn basis has. Iowa, Illinois and Indiana all saw gains of 2 to 5 cents. Despite higher basis soybean corn spot prices are down 40 to 50 cents across the nation. With increased rain in Brazil improving the South American crop, soybean prices may be set to fall even further.
This week, however, soybean basis gained a penny or two as basis inched up in response to the near 20 cent decline in futures. Some locations, like Cedar Rapids and Des Moines failed to raise basis over the week and farmers were left bearing the full burden of the drop in futures. In Illinois, most key markets bumped basis up a penny with East St. Louis raising average basis by 7 cents this week. To the east, basis has been slightly stronger. In Ohio, basis was up 4 cents at Toledo, Cincinnati and Circelville this week.
Weekly export inspections were at 20.02 million bushels this week, just short of analyst expectations of 22-30 million bushels. Exports continue to lag behind the usual pace. Cumulative shipments are 65.4% of the USDA forecast for the current season compared to the 5 year average of 71.8%. A lower export forecast and hence higher stocks seems likely for the coming March USDA supply and demand report.
The recent divergence in corn and soybean prices highlights the changing fundamental positions of corn and soybeans. Corn production is estimated to drop next year and firm demand from ethanol will likely push corn stocks down to more manageable levels.
World soybean stocks on the other hand continue to climb as South America pulls out of a two year drought. Improved seed technology and fungicide control may also limit rust problems this year. With some analysts expecting South American soybean production to increase anywhere from 8% to 13% there will be plenty of soybeans to go around this spring and summer.