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Kevin McNew: Bean basis continues to slide

Nearby corn futures
continued to push higher this week, as the critical $5 mark was within striking
distance. Market watchers continue to expect the corn crop to be smaller as
yield reports from harvested grain are below expectations. In the soybean market,
crop numbers continue to be large but soybean futures continue to hold firm
above $10.

As for the cash market, corn
basis was up slightly this week posting a 1-cent gain across the U.S. as a
whole. But, average numbers certainly hide the geographic disparity that is
going on. Areas with early harvest happening in the Carolinas, Illinois, and
Ohio saw some weakness as a result of combines starting to roll. Along the
river, barge rates have stabilized in recent days and actually drifted lower
over the past week. This, combined with a 5-cent advance in corn basis, helped
lift interior river terminal basis levels by a few pennies.

corn20100916.jpg

For soybeans, the basis has
been on a downward spiral over the past few weeks after trading at rather lofty
levels in July and August. Prospects of a bumper soybean crop that should hit
the market in coming weeks have most end users backing off their bids. On
average, spot soybean basis was off 15 cents a bushel over the past week. The brunt
of the weakness continued to be in areas where harvest is ongoing or within
range, while river markets and Upper Midwest markets have not seen as big a
change.

soy20100916.jpg

Weakness in the basis market
should continue and even accelerate in coming weeks with harvest getting into
full swing. Look for opportunities to forward contract for post-harvest
delivery as markets should pay ample returns through a wider carry.

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