Grain basis moved lower this week as a two-week recovery in the futures market seemed to run into headwinds. Farmer selling, especially in the Western Cornbelt has put basis on the defensive.
Corn basis was off 0.6 cents a bushel on average this week across the US thanks to increased farmer sales. Ethanol plants saw the biggest losses with a 1.6 cent a bushel drop with losses of 3 to 5 cents a bushel fairly common across IA, NE & MN. Meanwhile, river terminals had some stability this week as basis at the Gulf bids posted a 2 cent advance.
For soybeans, average basis levels were off 1-cent a bushel and unlike corn, is starting to see some weakness in the export market. Gulf bids were off 1 cent a bushel and upstream river terminals backed off on basis by 1.5 cents this week. Soy plants, which had been weaker the previous week, were mostly unchanged this week.
Grains started the week in positive territory but ended the week on a lower footing. Since the Jan 12 crop report, prices have been plagued by directionless, range bound activity, but this week saw some indications that prices may be due to break out to the downside of the range.
Wheat found support early in the week when news out of Russia suggested they may act to curb wheat exports as hyperinflation and a weaker rouble are causing wheat exports there to surge. But, by the end of the week, the Kremlin’s policy stance took an about-face, as leaders hinted they would instead look at ways to reduce wheat export taxes and keep wheat exports moving strong into the world markets. As a result of this news, wheat bounced off of its short-term high of $4.88 basis the March moved back to the $4.70 area.
In corn, large export deals to drought stricken India went to Ukraine this week as the US continues to struggle with the lack of a competitive price thanks to the strong US dollar. Ethanol production was off 2% this week versus last week and reached its lowest reading in 3 months. Ethanol margins are likely in a 10-15 cents a bushel loss when including all costs, although this figure is up since the start of the year with ethanol prices rebounding. Abengoa Energy announced they would sell their 6 first generation grain ethanol plants in the US as part of a bankruptcy deal with creditors. Corn is trading in a narrow range with $3.72 overhead resistance and the gap at $3.64 providing support.
For beans, there is some concerns about dryness in Argentina, and rains in Brazil are keeping the harvest there from getting underway. At the end of the week, USDA announced China had canceled 395,000 MT of US soybeans it had committed to earlier in the season. This sent beans lower by 10-cents. Support is around $8.70 for March beans with overhead resistance at $8.88.
The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a dba of Foremost Trading LLC (NFA ID: 0307930)