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Cash corn premium drying up

08/24/2011 @ 4:13pm

Bids for U.S. corn in the cash market have been slow to follow this month's rise in futures, as pending harvest and easing worries about near-term supply shortages have curtailed buying.

Basis, or the difference between cash and futures, has tumbled in the past two weeks. Based on a national cash price index maintained by the Minneapolis Grain Exchange, cash prices were at a 14 1/4-cent premium to nearby Chicago Board of Trade futures as of Aug. 9.

By Tuesday, however, futures had soared past the cash price, with nearby September CBOT corn of $7.30 1/4 per bushel a half-cent above the average cash price. Futures had closed at $6.78 1/4 per bushel on Aug. 9.

The shift reflects the oncoming harvest, which has started in the U.S. South and will pick up in the rest of the corn belt in coming weeks. The harvest has prompted buyers to sit on their hands, knowing that an influx of supplies will likely provide the opportunity for cheaper corn, analysts said.

Traders and analysts also say that basis has plunged especially sharply in the eastern corn belt, where ethanol plants had bid up prices and grain-holders kept a tight grip on supplies amid concerns about whether corn stockpiles would dip below minimum pipeline levels ahead of the new harvest.

Corn basis levels were generally lower again Wednesday, according to USDA data, with declines in central Illinois, Toledo and Memphis.

Basis at the U.S. Gulf was mixed Wednesday for corn, but fell for soybeans, by 2 to 4 cents.

-By Ian Berry, Dow Jones Newswires; 312-750-4072; ian.berry@dowjones.com
(END) Dow Jones Newswires
August 24, 2011 16:49 ET (20:49 GMT)

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