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Cash grain basis firms as harvest rolls

10/06/2011 @ 2:44pm

U.S. cash basis levels are firm, as grain buyers are forced to push basis bids with farmers essentially only moving grain to satisfy forward-booked contracts.

Industry analysts say buyers are forced to push prices as farmers are focused on harvest, and even less interested in marketing grain following the recent decline in futures.

Cash corn markets are surprisingly strong with harvest increasing, as most grain being delivered is previously committed bushels with the majority of the rest going into the huge amounts of on-farm storage built in the past few years, said Doug Bergman, broker with MF Global in Chicago.

The firm corn basis is especially true from ethanol plants trying to capture as much of the current profit margin as possible. The premiums are all for immediate shipment.

Basis is the difference between cash prices and futures market prices.

Processors and ethanol plants in the eastern Midwest continue to report price premiums for corn supplies. The basis ranged from two cents under December futures to 50 cents over December futures, according to data from USDA.


Harvest weather pressure in the Midwest, rainfall chances for the southern Plains and sluggish export demand for wheat all factored in to what was an unchanged-to-lower day in the grains Thursday despite a stronger start. Trading volume was light as many traders and marketers are looking ahead to the October 12 USDA Crop Production and Supply/Demand reports.

Cash soybean prices are mixed with basis at the Louisiana Gulf firming on a pickup in export demand, but weak at most interior locations as freshly harvested supplies enter the supply chain, Bergman added.

Meanwhile, midday barge basis levels for October shipment of soybeans to the Louisiana Gulf ranged from 22 cents to 55 cents over November futures, up two cents from Wednesday, according to data from USDA.

However, the soy harvest is advancing appreciably this week due to favorable weather, a feature limiting basis appreciation at local elevators.

Soybeans are more sensitive to weather damage and susceptible to field losses compared to corn, so farmers are aggressively harvesting soybeans and will come back and finish corn harvests.

-By Andrew Johnson Jr., Dow Jones Newswires, 312-347-4604, andrew.johnsonjr@dowjones.com
(END) Dow Jones Newswires
October 06, 2011 14:30 ET (18:30 GMT)

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