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Shipping considerations

Agriculture.com Staff 08/30/2007 @ 10:07am

Harvest is approaching and time is running out for the bulls. Crop condition scores, released this Monday, showed an improvement for both corn and soybeans. The scores surprised traders that were expecting a 1-2% decline in the good-to-excellent category. While the recent rains could create disease problems for soybeans, it is starting to look like we will have ample grain supplies this harvest. The question then becomes how do we store or ship this grain?

This week, it was apparent that shipping will be an issue. Barge rates jumped higher again this week, taking a toll on Basis. For both corn and soybeans basis was down by 10 cents or more along the river. Considering barge rates, this drop seems pretty reasonable.

Below is a graph of barge rates, in cents per bushel, from Memphis, Tennessee to the Gulf. With harvest beginning in the south, this area has seen a dramatic increase in barge rates; more than 10 cents higher this week alone. The spike in rates is drastic.

Moving north the same story holds true. Rates shot up along the Illinois River this week, where high water created problem, forcing more than 60 miles of the river to be closed. Barge rates in Minneapolis are 50 cents higher than the 5 year average. But unlike Memphis, barge rates in the North have yet to peak. Rates for October delivery are 20 cents higher than the spot bid, in many Northern locations.

Looking at a map of the change in corn basis for this past week it is apparent that barge rates are having an effect. Basis dropped 10 cents or more along the Mississippi river, and also saw pockets of extreme weakness along the Illinois where the river was temporarily closed.

The soybean map shows much of the same, with basis moving lower along the river. Additionally, harvest pressure in the south weakened basis even further.

Barring any surprises, basis should continue to weaken as harvest pressure moves north. Keep a close watch on your local basis so it doesn't get away from you. As harvest approaches, the difference between various elevator prices will widen even further. Most producers are focused on their field and can miss the 10 to 20 cent basis improvements that can be had from closely monitoring cash prices. In a low basis environment the only way to get ahead is to find the very best cash price opportunity available. Don't blink or you might miss it.

Harvest is approaching and time is running out for the bulls. Crop condition scores, released this Monday, showed an improvement for both corn and soybeans. The scores surprised traders that were expecting a 1-2% decline in the good-to-excellent category. While the recent rains could create disease problems for soybeans, it is starting to look like we will have ample grain supplies this harvest. The question then becomes how do we store or ship this grain?

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