Kevin McNew: Cash grain basis weakens
Grain futures continued their ascent to higher territory as the market looks for falling global supplies and increased U.S. exports. However, at home the underlying cash markets continue to show weaker basis trends and we expect these trends to worsen as we approach the new-crop marketing year.
For corn, this past week saw basis levels off 3 cents a bushel on average across the country as barge rates jumped 5 cents a bushel. The only areas mostly immune to falling basis levels were the Southern Plains of Kansas and Oklahoma were basis levels were mostly steady.
As we start to look ahead to new-crop harvest, both corn and soybean supplies are expected to be large which should put harvest-time basis levels weaker than normal. Furthermore, strong export demand will put a strain on grain flows causing barge rates and rail costs to increase, which should put more downside basis pressure this coming Fall. Look for opportunities to forward contract for post-harvest delivery as markets should pay ample returns through a wider carry.