US average corn and soybean basis was mostly unchanged this week, but there were big differences across the country depending on proximity to the rivers.
For corn, the river markets were hit hard with 8-cent losses on average tied to a dime discount at the Gulf export market. Barge rates did manage to move lower this week as flooding concerns waned and barge movement started to improve. For beans the draw-down in basis was less noticeable with river terminals down 4 cents on average and the Gulf down 8 cents.
End users of grain were mostly steady this week. However, there were modest improvements in the Central and Northern Plains. Corn Plants in SD improved basis on average by 2 cents a bushel.
With corn futures backing down this week we would expected to see basis levels start to firm. End buyer demand across livestock, exports and processing is rock solid so with spring fieldwork around the corner the next few weeks could be important to keep pipelines full.
The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a Branch of Foremost Trading LLC (NFA ID: 0307930
Grains corrected this week taking some of the steam out of the two-month rally with corn down 7, soybeans off 23 and wheat down 20.
Some hints of modest rains in Argentina were enough to give the bean market a reason to trade lower this week. Weather forecasts of modest rain are likely too little, too late but just their advertisement is enough for bulls to take profits for the time being. This week the Rosario Grain Exchange lowered its corn and bean estimates to 32 and 40 MMT, respectively. This compares to their previous forecast of 35 and 46.5 MMT.
On the demand side, US soy crushers ran at a record pace in February in the face of elevated crush margins. NOPA crush figures released on Thursday showed monthly crush at 153.7 MB with analysts’ average estimate at 149.4 MB. Soy export demand was also rock-solid at 1.3 MMT on the week, above analyst expectations ranging from 0.8 to 1.2. While year-to-date export sales for beans continue to lag behind pace by a large margin to reach USDA’s annual export forecast, the likely surge in US business brought on by the Argentina drought should help close the gap.
For corn, not only are exports exceeding the pace to reach USDA, but they are having one of the best 3-month sales streaks on record. There also seems to be no short-term let up with this week seeing a marketing year high of 2.5 MMT sold on old-crop. At the beginning of the marketing year USDA penciled in only 1,875 MB in exports, but now their forecast sits at 2,225 MB with another 100-200 MB of upside. This kind of export comeback is not unheard of. In 2007/08, US corn exports had a record year hitting 2,436 MB. But like this year, the 2007 early-season USDA projections were uninspiring at only 1,975 MB. We don’t believe the market has fully come to terms with the massive paradigm change in the export picture.
The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a Branch of Foremost Trading LLC (NFA ID: 0307930)