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Cash grain basis flat in face of economic turmoil

John Walter 08/08/2011 @ 2:42pm

U.S. cash basis levels for corn and soybeans are steady Monday, with many market participants content to sit on the sidelines in the midst of volatile grain futures and financial markets.

The slower movement of cash supplies combined with many grain buyers taking a cautious approach, particularly with most of their buying needs covered ahead of the autumn harvest, provided stability for basis levels.

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

There is a sense of caution in the market, with traders seemingly waiting for the dust to settle from sharp losses in external financial markets. Fears of slower global demand due to economic turmoil in the U.S. and in Europe kept grain traders on edge, analysts said.

U.S. equities and commodity markets fell, succumbing to the impact of the downgrading of the U.S. credit rating by Standard & Poor's.

Basis levels were flat in export markets as well, with falling grain and soybean futures failing to drum up new demand aside from routine business, analysts said.

The U.S. Department of Agriculture reported 31.748 million bushels of corn and 5.642 million bushels of soybeans were inspected for export in the past week. Both inspection figures were at the low end of expectations from a survey of trade analysts by Dow Jones Newswires.

In general, corn and soy basis levels have dropped across the crop belt, but the premiums ethanol plants are willing to pay above futures markets for corn are still firm despite easing from prior levels.

Processors and ethanol plants remain the highest bidders in Midwest markets, with spot corn basis bids at selected ethanol plants in the eastern Midwest leading the high basis bids. In western Indiana, the basis ranged from 30 cents to 50 cents over September futures, according to data from the USDA. In eastern Indiana and Ohio, ethanol plants are paying from 40 cents to 60 cents over September futures.

Ethanol plants that haven't secured enough inventories to carry them into the fall harvest continue to maintain firm price premiums.

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