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Basis gains ground with corn planting

Corn planting progress moved up to 25% complete this week, and with planting moving ahead, basis gained ground throughout most of the country.

A 5 cent drop in nearby futures also helped to push basis higher. The largest gains in basis were seen along the Eastern Seaboard, with improvements of as much as 10 cents in some markets. Wisconsin and Northern Michigan had the weakest basis this week with many locations decreasing basis by as much as 5 cents.

This week presented a much more varied picture of basis. Last week, we saw very minimal changes in basis. This week, strong export demand and a slowdown in cash sales has helped basis move up 2 to 5 cents through out most of Iowa, Illinois and Indiana. Monday's export inspections came in at 50.15 million bushels, considerably more than analyst expectations of 30 to 38 million bushels. An increase in the USDA's export forecast is appearing more likely.

Despite surprisingly high exports, corn futures traded lower on Monday as weather reports forecasted dry weather for the midwest. Dry weather would allow more farmers to return to the field. Early planting is correlated with high yields and increased corn acreage, so traders pushed prices lower. Monday's crop progress report, released after the markets closed, pegged planting progress at 25%, up from 9% last week. Monday's number was at the high end of analyst expectations (20%-25%), and with planting progress now 3% above the five year average the bears may try to push the market lower on Tuesday. Lower futures will be supportive for corn basis.

Looking at the national level, the US National corn index as maintained by the Minneapolis Grain Exchange suggested a basis of nearly -32 cent on Friday. That is a penny improvement over the previous week. Most all of the major grain merchandisers were bullish on basis as well. Particularly ADM and Cargill, which raised basis roughly 3 cents on average across all of their facilities that we track.

Over the past week, soybean futures have been mixed with some modest gains on Monday. Many traders are looking at dryer weather as a bullish sign for soybeans. The thought is, that dry weather now may prompt farmers to plant more corn, and with increased corn acreage the USDA may have overestimated total soybean acreage. Cash traders do not seem to be following this logic, as forward premiums for October delivery fell by roughly 5 cents this week. Most of the decrease can be attributed to declining new crop basis.

Spot basis, however, remains strong. The average US soybean basis, based off of the Minneapolis Grain Exchange index, improved 5 cents, moving up to -38. While there were significant improvements in basis in the Midwest, basis moved lower in the West and the South, with some locations dropping basis more than 5 cents.

Weekly export inspections were 9.16 million bushels; the low end of analyst expectations at 9-15 million. Cumulative inspections have reached 82.5% of the USDA forecast for the year, 2.5% below the 5 year average for this time of the year.

Both corn and soybean basis will likely move higher in the coming week as producers focus their intentions on planting. Watch for additional bumps in corn basis if traders beat down futures on the expectation of good/dry planting conditions.
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Corn planting progress moved up to 25% complete this week, and with planting moving ahead, basis gained ground throughout most of the country.

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