Market Matters Blog

What Happened to Soybean Basis?

Mary Kennedy
By  Mary Kennedy , DTN Basis Analyst
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DTN's national average soybean basis reached its high for the 2020-21 crop year during the second week of July. The DTN national average basis is computed using more than 2,800 soybean bids collected daily by the DTN Grain Bid Team. (DTN Chart by Kim Adrian)

The DTN national average basis started the new-crop year of 2020-21 running close its five-year strongest level and kept climbing, reaching its peak for this crop year during the second week of July, almost 95 cents higher than the DTN average five-year basis.

I wrote in April that country elevator-posted bids in some parts of the Upper Midwest were nearly double what they normally were for that time of year, with a few areas showing a positive basis where normal basis is usually negative. (See that column here: https://www.dtnpf.com/….)

That pattern continued into the summer as this isn't a normal year for soybeans, given short supplies and the June 30 USDA report once again confirmed the lower stocks.

The NASS June 30 Grain Stocks report said soybeans stored in all positions on June 1, 2021, totaled 767 million bushels (mb), down 44% from June 1, 2020. On-farm stocks totaled 220 mb, down 65% from a year ago. Off-farm stocks, at 547 mb, were down 27% from a year ago. Indicated disappearance for the March through May 2021 quarter totaled 795 mb, down 9% from the same period a year earlier.

In the Aug. 12 WASDE report, USDA projected soybean supplies for 2020/21 at 4.5 billion bushels (bb), down 3% from last year. Soybean crush was reduced 20 mb on a lower domestic soybean meal disappearance forecast, which is reduced in line with the prior year and lower soybean meal exports, reported USDA. With soybean exports down 20 mb on lower supplies, ending stocks were forecast at 155 mb, unchanged from last month.

The Aug. 16 National Oilseed Processors Association crush report showed the July crush at 155.105 mb of soybeans, below trade expectations. This was the smallest July crush since 2017 and the second smallest monthly crush total of any month since September 2019, given not only tight supplies but in July many plants had taken maintenance shutdowns.

Domestically, soybean meal has been in demand the past month as other protein feeds remain scarce. While soybean meal futures have been a mixed bag, the cash market for all protein feeds has been strong. This has kept processors needing old-crop beans to crush and paying high spot prices for old-crop beans. But, as the southern harvest nears, those higher spot prices are disappearing as processor basis fades closer to new-crop prices. Since the beginning of August, the DTN national average soybean basis has fallen 42 cents.

Soybean basis started to slide downward the third week of July as processors backed away from the high spot basis. On Aug. 21, the DTN average basis of -12X (12 under the November futures contract) was 61 cents off the highest basis this crop year and appears it will slide lower by the time the crop year ends. Even still, and given the tight supply situation, it will likely end the year well above the DTN five-year average just as it began 2020-21 crop year.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow her on Twitter @MaryCKenn

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