Basis strengthens on end-user demand
A holiday-shortened week saw stronger basis levels across the country. For the week, corn and soybean basis levels were up 3 cents on average across the country.
Corn had solid basis gains in the Western Cornbelt and Upper Midwest as many ethanol plants in this region firmed their basis significantly. Gains by key plants were in the double-digits for the week, putting upward pressure on basis in this region. Along the river, basis levels were mostly weaker over the last week as barge rates inch higher. Furthermore, Gulf basis continue to run flat which gives little spark to interior river markets.
For soybeans, a similar pattern was apparent with the Western Cornbelt witnessing the most strength for the week. Soybean crushing plants were up on average by 2 cents a bushel, but not as strong as the overall market average. For soybeans, basis direction will likely be tied to the Gulf export markets in coming weeks. We’ve had a 25-cent increase in Gulf export soybean basis since the first of November which has helped push the overall market higher. The same is not true for corn, however, as Gulf corn basis has been mostly unchanged over the past month.
Basis levels should continue to move higher for the next few weeks. Snow and cold over the Upper Midwest will likely hamper cash grain movement in these regions and farmers seem intent on holding out for higher prices. Forward contract basis levels are running fairly favorable for corn, but less so for soybeans where it is hard to pencil storage returns by locking in forward basis levels.