Basis recovers as harvest comes to a close
Corn and bean basis posted nearly 3-cent gains on average over the past week as harvest starts to come to an end. Helping fuel the basis recovery is a rather range futures market, where corn and soybean prices have been drifting in a relatively narrow 10- to 20-cent range, respectively.
Corn basis levels were up dramatically along the river markets this week thanks to a 9-cent advance in the Gulf export basis. Barge rates have come down off their harvest highs which has also helped lift basis. Further weakness is expected in barge rates as they should continue to sink lower along normal seasonal lines. Northern reaches of the country and sections of the Western Plains were slightly lower this week as harvest continues to be going strong.
For soybeans, basis levels were up across the country, but the Gulf market lacked any positive momentum. Bean basis at the Gulf was off 3 cents which kept southern River markets lower. In the Upper Midwest, sharply lower barge rates helped give a modest lift to river terminals in the region.
Although basis levels are beginning to recover, both corn and soybean basis levels are substantially weaker than normal for this time of year. The table below shows current basis levels by state relative to the 5-year average basis for this time of year. For corn, the US average basis is off 20 cents compared to historical norms, while soybeans are off 11 cents. Most states show significantly weaker basis, in the range of 10 to 30-cents weaker. The exception is Eastern Cornbelt were grain basis levels are actually stronger than normal. Much of this may be attributed to the early harvest that hit this region this fall, and put harvest at an end a few weeks ago. As such, they are on a faster road to post-harvest recovery.
Look for the rest of the country to also show signs of steady basis improvements in coming weeks. Sharply lower basis this harvest combined with little direction from futures should keep farmers from aggressively filling the cash market pipeline.