Cash Comments -
Grain basis inched higher this week for both corn and soybeans with 1-cent advances on average across US buyers.
The backdrop of weakness in futures and looming uncertainty around the end-of-week USDA report kept most people holding tight. Farmers still seem to hold a lot of cash corn and a high percentage of it unpriced. In corn, ethanol plants had bit of upside this week gaining 1.7 cents on average across 142 plants. The Western Cornbelt has seen some decent gains in spot basis over the past few weeks. ADM Columbus has boosted its basis by 15 cents a bushel in the past two weeks and a limited number of other buyers in the WCB seem to be showing a similar appetite to attract more grain.
For soy crush plants, average basis across 47 plants was up 1.6 cents a bushel, slightly better than the US average change. A few plants in the ECB did boost basis by a dime, but the vast majority were flat and continue to have weak basis as compared to historical norms for this time of year.
River terminals for both corn and soybeans posted average gains of 1 cent on the week. However, considering a decline in Gulf basis of 5 and 3 cents for corn and soybean basis, respectively, it was fairly remarkable that interior basis was able to hold up along river markets
Futures Comments -
Corn and wheat managed to hold steady this week heading into Friday’s USDA crop report, while soybeans felt pressure from South America and gave up 28 cents on the week.
Brazil continued to see good yield and production potential as harvest there reached the two-thirds complete mark. Brazilian analyst Agroconsult pegged the soy crop there at 113 MMT versus a previous forecast of 111 MMT and well above USDA which was at 108 MMT. Their latest forecast was based on a crop tour which suggested record yields in many growing regions. For corn, they kept their forecast at 95 MMT also above USDA at 91.5 MMT. In Argentina’ harvest is just getting under way and rains this week slowed the progress but the longer-term 11 to 15 day outlook looks dry which should keep harvest moving without serious interruptions.
In the US, rains swept across the Southern Plains mid-week helping bring relief to drought stricken areas of Kansas, Oklahoma and Missouri. More storms are expected this weekend and into early next week which will also fuel growth for winter wheat areas.
In corn, ethanol production was up sharply for the 2nd week in a row bucking the normal seasonal trend of heading lower. But, ethanol stocks ballooned on the week as gasoline usage continues to falter. Export business for corn was weak in the latest weekly report from USDA but still remains reasonably robust. There has been increased competition from Southern Hemisphere players like South Africa and South America has harvests there recovers and leads to more exportable supplies.
At week’s end, the USDA plantings report gave some surprises as corn acres were lower than expected and bean acres were higher than expected. USDA pegged corn plantings at 90.0 million acres, below trade estimates of 90.96, and off 4 million acres from 2016. Bean acres were at 89.5, higher than average estimates of 88.2. Meanwhile, wheat acres were mostly as expected at 46.1, off 4 million from last year. However, universally, Quarterly stocks as reported by USDA were all higher for corn, soybeans and wheat higher than expected. Overall, this report does little to stem the bearish slant to the market.