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Basis fireworks

With ample supplies, an already-wide cash soybean basis continues to widen.

Soybean basis is seeing the greatest loss in basis. Though the basis has been wide since last fall, it was last week's $0.50 jump on the Chicago Board of Trade futures price that sent the soybean basis gapping hard, market-watchers said.

On Tuesday, the Northern Country Co-op in southern Minnesota offered producers a corn basis $0.49 under the board at $2.86 cash. The soybean basis was $1.13 under the CBOT futures price, for a cash price of $7.99.

Jerry Van Oosbree, Northern Country Co-op manager said the elevator's grain merchandiser is setting basis prices off of weak offers from processors.

"I've never seen the soybean basis this wide," Oosbree said. "I'm guessing the processors have enough beans bought for whatever processing needs they have. At least, that's what the market is telling us right now."

With the USDA estimating 4.0 million fewer soybean acres compared to last year, the demand picture could be different in 2008, Oosbree said.

"This time next year, we may be looking at even basis, but I've never seen this wide of a basis," Oosbree said.

At most of their 12 locations along the Minnesota/Iowa border, producers looking to move their crop are focused on cash price only, not the poor basis, Oosbree said.

Gary Ficher, grain merchandiser for Premier Ag, Columbus, Indiana, said the soybean basis stinks and there is no immediate sign of it getting better.

"Producers think the soybean basis stinks, but I think they realize they should be selling $8.00 beans," Ficher said. On our end, we're not going to pay anymore than we have to. We know the processors have what they need. We also know it's time for the river-for-export business is moving away from us."

On Tuesday, Premier Ag's corn bid of $2.21 was $0.10 under the CBOT. The soybean bid of $7.99 was $0.63 under the "board."

Ficher added, "The farmer just needs to look at this $8.00 bean market and get them going."

If the producer has room to store their soybeans and wait for a better price, the carry in the market indicates better profits, Ficher said.

"The problem is, with a new crop coming, nobody is going to be able to store that long," Ficher said.

Because of large supplies, producers turning to alternative markets for higher bids are likely to be disappointed, Oosbree said.

"Sure, if you are right next to an ethanol or biodiesel plant, you'll find a better bid. But, the further you get out, the trucking costs eat into profit real fast," Oosbree said. "You'll get a better bid, but those plants have a wide basis as well."

With ample supplies, an already-wide cash soybean basis continues to widen.

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