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Patience chokes cash corn prices

08/25/2011 @ 1:55pm

A lack of urgency by buyers is limiting U.S. cash grain prices as the harvest approaches.

With corn harvest under way in the South and expected to work its way into the heart of the Midwest in coming weeks, grain buyers are betting the influx of supplies will provide them with bargain prices compared to current levels.

"The end-user is a very, very patient buyer," said Jason Ward, analyst with Northstar Commodity in Minneapolis.

That has helped push basis, or the difference between cash and futures, down sharply this month.

Based on a national cash price index maintained by the Minneapolis Grain Exchange, cash corn prices on average were two cents below Chicago Board of Trade futures as of Wednesday's close. As recently as Aug. 9, futures were at a 14 1/4-cent premium. Futures gains since then have far outstripped cash prices.

One ethanol plant Ward works with this week bought corn at 10 cents below the futures price, three weeks after buying corn at a 55-cent premium to futures, he said.

While ethanol producers continue to buy as demand for the renewable fuel stays strong, worries earlier in the summer about a supply crunch ahead of the harvest have abated. Meanwhile, export demand has been sluggish, as evidenced by lackluster weekly sales Thursday, and some analysts say livestock producers are using less corn because wheat prices are more attractive by comparison.

The weakening basis might not continue long after harvest kicks into full gear, said Jason Britt, president of Central States Commodities. He said all the buyers on the sidelines could spark a significant competition for supplies once the harvest enters the pipeline.

U.S. Gulf barge basis bids were mixed Thursday, with an increase of 5 cents for August supplies and a 1- to 2-cent decline in bids versus the December contract. Soybean Gulf basis versus the September contract was 1- to 4-cents lower.

-By Ian Berry, Dow Jones Newswires; 312-750-4072; ian.berry@dowjones.com
(END) Dow Jones Newswires
August 25, 2011 14:45 ET (18:45 GMT)

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