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Kevin McNew: A reason to laugh, a reason to cry

Agriculture.com Staff 01/16/2007 @ 8:13am

Friday's barrage of USDA data caught most traders by surprise and the result was a limit up move for corn and a near limit move for soybeans. While this was welcome news for grain farmers, the bad news is that most basis levels have taken a big hit in the past week thanks to higher barge rates.

Barge rates moved sharply higher in the past week as the number of empty vessels moving up river continues to slide. For December, the number of empty barges moving up the Mississippi river fell from 1,100 in November to just over 200 in December. So far in January there appears to be no significant upswing in available barges which could keep barge rates moving higher.

This past week, rates from St. Louis to the Gulf jumped 15 cents a bushel this, while other rates at key markets were up around 10 cents. Higher barge rates lead to lower basis levels as grain shippers must offset the cost of rising barge freight.

As a result, even with the 20 cent bounce in corn futures on Friday, some key river terminal markets barely budged their corn bids higher. Losses in basis of 10 cents were fairly widespread throughout the Midwest markets connected to the rivers. In addition, losses of 5 cents a bushel covered much of Iowa, Illinois and Missouri as barge rate increases had the biggest effect here.

For soybeans, the impact was even more evident. Basis losses of 10 cents again were common around the river but even similar losses occurred in much of the Plains and Eastern Cornbelt. With ample stocks of soybeans and soaring soybean futures, we doubt that basis needs much of a lift to keep farmers moving beans into the marketplace.

Continue to expect very little positive movement in basis in the coming weeks. Barge rates should continue to march higher and rising futures will keep the pipelines full of both corn and beans for end users that will pay lofty prices.

Friday's barrage of USDA data caught most traders by surprise and the result was a limit up move for corn and a near limit move for soybeans. While this was welcome news for grain farmers, the bad news is that most basis levels have taken a big hit in the past week thanks to higher barge rates.

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