Soybean basis posts impressive gains
Corn futures rallied in the early part of last week, before giving up most of the gains on Friday and Monday. The corn market has been following energy prices higher, and when these markets moved lower, corn played along. It also looks like the run up in corn prices earlier last week shook loose a few bushels, with increased farmer selling attributed for some of the correction. But, now after the correction, farmer selling has slowed once again.
In addition to slow farmer selling, the USDA reduced their production estimate from 13.318 billion bushels to 13.168 billion bushels, lowering the national yield to 153. The Iowa yield was reduced by five bushels.
With the recent rally in corn futures and improving basis, the average producer has seen a 25-cent increase in cash corn prices since this time last month. Better basis is responsible for about 10 cents of that gain. Corn basis continued to improve this week as well, with the only pockets of weak basis occurring in Illinois and the North East.
Soybean basis was even more impressive. Basis was unchanged or higher through out the country this week. Western Iowa, Southern Minnesota, South Dakota and Nebraska saw basis improve by more than five cents this week. A number of Nebraska markets increased basis by more than 10 cents. These improvements in basis are impressive considering that soybean futures rallied 50 cents over the same time period.
Informa Economics also release their 08/09 acreage estimates this week. They lowered their forecast for 08/09 acres from 71.7 to 68.1 million. This report would suggest that beans may not be doing as well in the acreage war as expected. With strong exports in the face of record high prices, soybean prices may need to move higher before demand begins to slacken.
The average soybean basis, across the country is -85 cents. Despite the recent improvements, basis remains well below normal. But then again futures are far from normal as well. Defining normal is becoming increasingly more difficult.
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