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More downside expected for basis levels

Basis conditions changed quickly this past week, as harvest started to pick up pace. Last week’s slow start to harvest left key end-users scrambling to cover short-term needs and driving up basis. However, as weather improved and harvest picked up steam, basis levels quickly headed south.

For both corn and soybeans, basis was especially hard hit in the eastern Corn Belt (ECB). Ample crop supplies in this region is one culprit for the weak basis, but also higher barge rates contributed to lower basis.

Along the Ohio River, barge rates were up 11 cents a bushel for the week. From Cincinnati to Evansville, basis levels took a hit from higher barge rates with losses of 8 to 10 cents for corn and 15 to 20 cents for soybeans along key river terminals.

Gains in barge rates along other rivers were also common, but not as pronounced. On the Upper Mississippi and Illinois, barge rates gained 5 cents a bushel while further south at St Louis and Memphis barge rates leapt 10 cents for the week as harvest put pressure on barge traffic.

In the corn market, some areas of the country continued to see strong basis levels. In Iowa and Nebraska, where harvest is less than 10 percent complete, basis levels were up 2 to 4 cents a bushel. For Illinois through Ohio, basis levels were weaker as harvest was further along. However, with significant corn cutting left, basis should still see more downside risk.

The soybean market saw more pressure in the WCB were soybean harvest was further along. In addition, basis losses of 10 to 20 cents for the week were fairly common. Some elevators are already storing beans on the ground, so basis pressure should continue.

With much of the crop left to harvest, basis levels are likely to continue lower. The ECB faces the most risk of lower basis where crop production is more favorable. In corn, we would expect basis levels to stabilize fairly quickly as bullish fundamentals will have farmers holding tight to their crop. To raise cash, however, farmers will likely move soybeans to the market first which will keep bean basis on he defensive for the next 3 to 6 weeks.

Basis conditions changed quickly this past week, as harvest started to pick up pace. Last week’s slow start to harvest left key end-users scrambling to cover short-term needs and driving up basis. However, as weather improved and harvest picked up steam, basis levels quickly headed south.

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