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Corn cash basis moves sideways, no change seen until planting resumes

Agriculture.com Staff 04/20/2006 @ 9:06am

Basis continued to move sideways this past week, despite declining corn futures. The National Corn Index still sits at $2.03, implying an average national basis of -33 cents, the same as last month's basis.

Export inspections were also lackluster this week, coming in at 29.2 million bushels as compared with trade expectations at 32-37 million. The good news for corn basis is that cumulative shipments are now 59% of the USDA forecast for the year, 10% higher than the 5-year average. Strong demand should strengthen basis now and into the future. The record low basis levels seen in 2005 are not likely to show themselves in 2006.

While basis was mostly flat this week there were regional differences. Missouri, Illinois, Kentucky, and Indiana saw basis pick up by a penny or two in places, while across the river in Iowa basis was down just slightly. Wet weather has slowed planting (planting progress is 50% behind the five year average for this time of the year in both Illinois and Indiana) but despite the slowdown these states are further along with planting than some of their neighbors to the North and West. Expect basis to move up in Iowa and Minnesota once planting gets into full swing.

Soybean basis continued to move up again this week, posting 2 to 5 cent gains through out much of the country. The only areas of weak basis were in parts of Texas and along the Eastern Seaboard. It is encouraging that soybean basis was able to gain ground even with higher futures this week.

Part of the reason for stronger soybean basis is due to decent demand from both the domestic and export markets. NOPA crush numbers came in at 143 million bushels, 2 million bushels more than analyst expectations. Export inspections for soybeans came in at 11.5 million bushels. While small, the number was within the range of analyst expectations. Furthermore, it looks like exports are within range of meeting the current USDA forecast for the season.

Weather and planting conditions will continue to play on basis. Wet weather will keep farmers out of the field and some farmers will take the opportunity to make cash sales, weakening basis. Futures traders will take a delay in planting as a forewarning of lower yields and may push futures higher. Higher futures will also weaken basis. So if you are looking for basis appreciation over the coming weeks, hope for dry weather so producers can get busy in the fields and out of the cash market.

Basis continued to move sideways this past week, despite declining corn futures. The National Corn Index still sits at $2.03, implying an average national basis of -33 cents, the same as last month's basis.

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