Grain futures came under pressure this week as US dollar strength and slow export business took its toll on the market. In the cash market, there was little movement in basis by grain buyers as a whole with U.S. average soybean basis unchanged for the week while corn basis gained only 1-cent on average across the country.
Barge rates were on the rise this week especially along the IL & MS River where gains of 10 cents or more per bushel were fairly common for barge costs. As a result, basis levels in these areas were off fairly sharply. For corn, Gulf export bids were up 4 cents a bushel which helped to blunt some of the basis declines upstream along the river system. For ethanol plants, basis gains were better than the overall U.S. average gaining 2.25 cents a bushel this week. Especially strong were some plants in the Western Cornbelt were gains of 5 to 10 cents were fairly typical at some key plants.
For soybeans, it was another week of lackluster movement in basis with U.S. average basis sitting at -43K, virtually unchanged since the start of the month. At the Gulf, export basis was up 8 cents a bushel, but higher barge costs offset this gain putting river terminal bids under pressure by 2 cents a bushel. For soybean plants, basis levels were mostly unchanged but some modest strength was apparent in the Western Cornbelt plants.
This week the U.S. dollar volatility pushed and pulled grains caused by anticipation and the reaction to the FOMC statement issued on Wednesday. The FOMC indicated in their latest statement, that a rate increase will be unlikely in the April meeting and announced that they will make a rate hike after they are “Reasonably Confident” inflation will move back to the 2 percent target and after further improvement in the labor market has been observed. The dollar traded sharply lower following the statement as traders viewed this position as a continuation of extremely low interest rates and the delay of any interest rate hike that was expected in the near future.
NOPA crush numbers were released on Monday and showed 146.970 million bushels of soybeans crushed in the month of February, the largest recorded since 2010. This figure was lower than the average analyst guess of 148.537 million bushels, but up from last year’s figure of 141.612 million bushels. The trade reaction to the report was relatively mute with little volatility in soybean prices following the release of the NOPA numbers.
Export sales this week were within analyst expectations for soybeans and wheat, but on the low side of expectations for corn. Wheat booked 391,900 metric tons for the week ending March 12th, up 12 percent from the previous week. Corn sales were reported at 502,300 metric tons up 20 percent from last week but on the low side of expectations which ranged from 500,000-700,000 metric tons. Soybean sales fell within analyst expectations with 342,000 metric tons booked for 14/15 delivery. Expectations for soybean sales ranged from 250,000-450,000 metric tons. Corn, Soybeans and wheat are all running ahead of pace to meet current USDA export forecasts.
On Wednesday, the EIA announced that ethanol production increased again 3,000 bpd to 947,000 barrels per day. This year’s ethanol production is now up 5.7 percent compared to last year. In the March WASDE report the USDA lowered its corn used for ethanol to only a 1.3 percent increase year over year. Recently, there has been talk of Brazilian ethanol being imported into the U.S. due to the strong shift in currency rates. This news is a negative sign for both ethanol and the corn markets.
Wheat continued its short covering rally this week as the national weather service issued a “red flag” warning across the plains on Monday. The warning was for very warm temperatures, low humidities and southwest winds which created an environment at risk of rapid wildfire growth. The dry conditions throughout the plains have caused Kansas to drop its weekly wheat crop rating to 41 percent good-to-excellent from 46 percent last week. Texas weekly crop report improved a percent, but the Oklahoma wheat conditions declined two percent this week. The latest drought monitor shows parts of the Texas panhandle and western Oklahoma in “Extreme Drought” with only minor relief expected over the next 30 days. Some light showers of 1/4 inch or less was seen across the plains on Thursday but the forecast turns drier over the next 10 days. Russian growing conditions have also been unfavorable, receiving unseasonably warm dry weather fueling crop concerns as farmers begin seeding.
The recent warm-up has triggered flooding on the Ohio River which has halted grain loading at many river terminals. The National Weather Service has issued a flood warning in the Cincinnati area early in the week and expected the river to stay at flooded at least through Thursday.