Market Matters Blog

Soybean Basis, Barge Freight Steady

Mary Kennedy
By  Mary Kennedy , DTN Basis Analyst
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The accompanying soybean basis chart shows the strongest (red line) and weakest (blue line) the national average soybean basis (DTN National Soybean Index subtracted from the Chicago futures contract) has been over the last five marketing years, along with the five-year average basis (purple line). As the chart indicates, the national average soybean basis of 19 cents under the March futures (green line) is 1 cent lower than last week, but continues to move well above the five-year average of the strongest basis at this time. Most of the weakness was seen along the river last week due to the traffic jam at Vicksburg after an oil spill last Sunday closed a 16-mile stretch of the river there. However, spot basis levels for soybeans south of the closure were stronger as exporters needed to get beans in place for vessel loadings. The Coast Guard reported this past Saturday that, after a 7-day slowdown, the river was open once again with the oil cleanup having been completed.

Lower barge freight and uncertainty over how long the closure would last did slow barge traffic last week. The USDA reported in its weekly Grain Transportation Report: "During the week ending February 2, barge grain movements totaled 428,704 tons, 14% lower than the previous week and 40.5% lower than the same period last year. During the week ending February 2, 273 grain barges moved down river, down 11% from last week; 513 grain barges were unloaded in New Orleans, down 20.2% from the previous week."

Barge freight rates were lower for the week ending February 2 as rates continue to remain at levels not seen since late last summer. The demand for empties has been light recently due to the low rates, but more so due to the uncertainty that has surrounded the river navigation because of low water levels in January and then most recently due to the closure of the river because of the oil spill. The USDA reported that Illinois barge freight was down 2% from the prior week and is 18% lower than last year at this time and 25% lower than the 3-year average. In St. Louis, where the river levels have been the lowest the past few months, freight was down 16% from last year at this time and 25% lower than the 3-year average. Also reflecting the river navigation problems recently is that, according to the USDA, river traffic at Locks 27 was 62.8% lower than this time last year and 43.3% lower than the 3-year average.

Locks 27 are the only locks south of where the Mississippi River and Missouri River meet. These locks handle more cargo than any other navigation structure on the Mississippi River. The most recent issue that has been plaguing Locks 27 has been due to 2 separate, related accidents. The extremely low water levels last fall exposed the steel, rocked filled cylinder that is in place to help the barges become aligned as they pass through the locks. An accident caused the cylinder to split and fill the channel with rocks which closed the river both ways for 5 days after temporary repairs were made. Last month, the main chamber that had been damaged in September, closed for permanent repairs. That left only the auxiliary chamber open until a barge got caught in the gate and caused the traffic to be stopped for a few days while temporary repairs were made. As Gulf soybean exports remain strong, we will continue to see the basis affected by any river closure or even a slowdown of barge traffic.

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