Grain basis levels continued to hold relatively stable this week with soybeans unchanged while corn basis was off 1 cent a bushel.
Basis levels have been exceptionally stagnate for some time. Indeed, going back to Nov 1, spot corn basis versus March corn futures has only improved 11 cents a bushel, with the majority of that move occurring in November. Likewise, soybeans has seen only an 8-cent advance in basis since Nov 1 off the March futures.
This week saw some weakness at the Gulf with both spot corn and soybean basis off 3 cents a bushel. But, river terminals saw an increase in basis for soybeans by 0.5 cents a bushel, while corn basis at river terminals was off 2.5 cents a bushel.
For end users, ethanol plants were weaker by 0.7 cents a bushel, but soybean plants posted a 1-cent advance on average for the week.
Grains came under pressure this week with wheat giving up 14 cents a bushel, corn off 8 cents and soybeans posting only a modest loss 1 cent a bushel.
USDA’s monthly supply and demand report released on Tuesday did little to stem the tide of lower prices. Government forecasters increased their expectations on old-crop supply carry-out. Corn and wheat stocks showed the biggest increase thanks to a drop in USDA’s projections for exports. Soybean crush numbers were lowered as well helping boost soybean inventories to 450 MB. The USDA also raised its forecast of 2015/16 world wheat ending stocks to 238.87 MMT, above trade estimates. The figure would be the largest in history if realized.
In South America, the week started with favorable rains in Argentina’s dry areas and ended with more rain expected in the coming weeks. Central and southern Argentina will see regular rounds of showers and thunderstorms and enough rain should fall to maintain favorable soil conditions. Northern Argentina will see less rain than areas to the south with northwestern Argentina driest overall. Subsoil moisture in northwestern Argentina is still adequate and should be supportive of crop development for a while longer, but greater rain will be needed soon.
In export news, USDA announced flash sales of US corn to Japan and an unknown destination this week, totaling nearly 300,000 MT. But, weekly sales reported by USDA for the week prior were disappointing with net sales for old- and new-crop combined totaling only 365,000 MT versus expectations of 1,000,000 MT going into the report.
Outside markets were on shaky ground this week as global weakness continues to weigh on equities. The US dollar has fallen sharply over the last two weeks off of its highs, and many analysts look for the long-standing bull market for the US dollar to end. This would be a welcome change for US ag markets as a strong dollar has eroded US export competitiveness in the past 6 months, especially for wheat and corn.
With all of the risk in global equity markets, the silver low of $14 is quickly turning into a silver buy. Prices have shot up over 12% in the past two weeks! And are likely to see a return to the $25-mark as the US dollar weakens.
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