Cash grain basis levels steady, farm sales slow
After a heavy dose of farmer selling, particularly corn, following a 15% jump in futures prices since Thursday, producers have eased selling and end users are less aggressive buyers, a cash-connected Chicago Board of Trade broker said.
The cash basis is still holding firm despite the increase in producer selling following the rally in prices since Thursday, as feed demand held firm and demand from ethanol plants remained consistent.
The surge in corn prices has farmers bullish, and with concerns about the availability of corn supplies near the end of summer, many producers are looking to hold onto remaining stocks as insurance against any 2011 crop issues, cash traders said.
Corn inventories are projected at the lowest levels in 15 years, a feature buoying prices.
The cash corn basis has been a little disappointing in the face of tight stock outlooks, a signal that processors, feeders and ethanol plants are not showing any urgency to acquire supplies at this point.
Meanwhile, soybean bids are tapering off, as slowing demand and increased competition from South America weigh on prices. Weak cash basis levels in South America and lingering talk in the market that China is rolling South American soy purchases as well as switching a few U.S. soybean purchases to Brazil damped support for soy prices.
Gulf midday barge freight basis reported by the U.S. Department of Agriculture on Friday said the spread for spot corn bids ranged from 48 cents to 58 cents over May futures, down 4 cents from Monday. Soybean bids ranged from 47 cents to 60 cents over May CBOT futures, unchanged from Monday.
The export basis, or difference between cash prices and futures, was unchanged for wheat and soybeans, and down 1 cent for corn at the Louisiana Gulf, according to U.S. government data.
The uncertainty of weather heading toward spring plantings in the Midwest and its impact of final acreage totals will keep a very cautious view on selling this year, particularly in the face of volatile price action.
"Cool soil temperatures are said to be preventing any corn planting so far in the heart of the corn belt, but very warm temperatures coming up for Thursday to Sunday may prompt some fields to get planted," Freese-Notis Weather said in a forecast. The Midwest is forecast to see more than one day in that period with highs getting above 80 degrees.
"Rain is going to accompany that warm-up, with rain for Thursday/Friday in northern parts of the Midwest and then probably a major outbreak of severe weather as a big storm takes shape for the end of the coming weekend," Freese-Notis added.
-By Andrew Johnson Jr., Dow Jones Newswires; 312-347-4604; firstname.lastname@example.org
(END) Dow Jones Newswires
April 05, 2011 14:48 ET (18:48 GMT)