Basis levels were mostly unchanged for corn across the US this past week, while soybean basis nudged lower on the late week strength in futures.
Basis levels at river terminals had the most weakness as a slowing bean export program has started to deflate basis levels. For the week, soy basis at river terminals dipped nearly 3 cents with key terminals along the IL River off 5 to 7 cents. For corn, there were some modest gains of 1 to 2 cents along the MS River terminals but IL River terminals were mostly 3 to 5 lower.
For end users, corn plants were mostly steady on the week with notable movement while soy crushing facilities were slightly weaker.
With soy futures leaping higher at the end of the week basis levels for beans may come under more pressure from active farmer sales. However, corn stocks held by farmers continue to be record large which will keep corn basis on the defensive as well between now and spring.
Soybeans got a late-week boost thanks to a surprise cut in US production. This helped lift prices by 45 cents a bushel while corn and wheat showed more tempered gains of 1 and 3 cents, respectively.
Early week trade focused on growing conditions in South America. The bulk of Argentina remains overly wet and late season planting may be curbed there. But, in Brazil, conditions remain nearly ideal as only a small portion of the NE part of the country is dry although rains are expected to improve growing conditions in the coming two weeks.
In international news, China announced they would levy high tariffs on US DDG imports with up to a 50% tax expected. In the last year, China had imported 2 MMT of US DDGs but this move will likely cut that number in half.
At the end of the week, USDA gave the trade fresh news on supply and demand data. USDA caught the trade by surprise yesterday when it trimmed US soy output on lower acres and yield forecasts. The net result was a 54 MB drop in production which cut ending stocks from 480 MB last month to 420 MB this month. USDA also dropped their US corn yield and acres forecast, helping lower production by a slim 78 MB.
However, on the bearish side, the Quarterly stocks report showed bigger than expected corn and wheat inventories, which implied lower feed use than what USDA had been projecting. Dec 1 stocks implied 1st quarter (Sept-Nov) U.S. corn feed/residual usage at 2.280 billion bushels, up just 4.6% from last year’s 2.179 billion. Corn for feed use was dropped by 50 MB to 5,600 which still reflects a 9.1% annual increase over 2015, while Q1 feed use was up only 4.6%. Wheat feed use was also lowered by 35 MB to 225.
The only bright spot on wheat was the steeper than expected drop in US winter wheat plantings, plunging 3.8 million acres over last year while the trade expected only a 2 million acre cut. This would be the lowest plantings in 107 years. Nonetheless, global supplies continued to mount with world carry-out ballooning to 252 MMT up from 251 MMT last month on increased production in Russia and Argentina.
Going forward, the trade will continue to focus on SA’s growing season. Portions of central Argentina will still be affected by heavy rain this weekend and more flooding is probable. But, Brazil continues to see nearly ideal conditions. Also, with wheat plantings “known” traders will start to conjecture about US spring acres, with farmers believed to be heavily biased towards 4 to 6 million more acres of soybeans in 2017.