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Kevin McNew: Bean basis continues to slide

Agriculture.com Staff 09/17/2010 @ 2:40pm

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.

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.

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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