Market Matters Blog

Soybeans

National average soybean basis of 40 cents over the July futures is 6 cents higher than last week and continues to move above the 5-year average of the strongest basis at this time. The large inverse in the May-to-July futures spread has caused the chart to show a large spike in basis, when in reality the switch from the May to July was about a five-cent basis premium. Soybean basis has been stronger in the interior as processors look for nearby supplies. Farmers have slowed down selling and many were having problems moving contracted corn to market after upper Midwest snow storms recently caused roads to become treacherous. Another factor lending basis underlying strength is continued shipping delays in Brazil with news reports last week that ships were waiting 41 to 51 days in Brazil's two major ports. If these delays continue or worsen, demand for U.S soybeans could increase. Basis along the river was weaker as flooding caused barge traffic to come to a halt. After a string of 114 barges broke loose from the Port of St Louis, causing 11 barges to sink Saturday and closing the river, the river at Vicksburg was reopened late Monday. Flooding on the upper Mississippi and Illinois rivers caused either slowdowns or closures at locks and dams on those two rivers that could last through the end of the month.

Corn

National average corn basis this week of 25 cents over the July futures is up 2 cents from last week and continues to move higher than the 5-year average strongest basis level at this time. The basis moved to the July last week, using a strong inverse in the May-to-July spread to generate a 1- to 2-cent spike in the basis at the time of the move. Basis strength was seen at ethanol plants late last week after the EIA reported last Wednesday that ethanol production was down 2.6% from the prior week, causing the spot ethanol cash market to move higher on decreased production and lower inventory. The cash corn price was stronger to end the week as concerns about planting delays from recent heavy rainfall and cooler temperatures gave the market support while worries about tight supplies continue to keep basis firm. However, as temperatures warm up and drier weather is predicted, we will see the cash corn price weaken as corn planting starts.

Hard Red Winter Wheat

National average HRW basis for this week at 29 cents under the July futures is still above the 5-year average of the strongest basis at this time and is up 2 cents from last week. The cash market was firm last week as concerns remain that cold temperatures in areas of the Texas Panhandle and parts of Kansas, along with hail in Oklahoma, may have caused further damage to the HRW wheat crop. It remains unclear as to how much freeze damage occurred in the past 2-3 weeks, but the CEO of the Kansas Wheat Commission stated on Friday that a 25% reduction in the Kansas HRW wheat crop is possible due to damage caused by freeze. According to USDA, Texas and Oklahoma state officials are still in the process of assessing freeze damage with reports there is a strong probability that some crops did suffer damage or loss.

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