Basis is lousy, but not everywhere Cash markets a barometer for corn and soybean yields By Bryce Knorr

Transcription

1 Basis is lousy, but not everywhere Cash markets a barometer for corn and soybean yields By Bryce Knorr The 217 marketing year for corn and soybeans ended on a very weak note for basis as bids got ready to officially roll out of September. But buyers weren t sitting on their hands everywhere, reflecting the boom or bust yields seen around the country this year. Some end users strengthened basis enough to raise the average overall, even though the median bid was two cents lower. Livestock feeding areas led the cash market firmness, with strong bids seen in the Carolinas, where corn yields were down sharply from 217. Drought on the southwest Plains also helped boost bids from western Kansas down into Oklahoma and the Texas panhandle. Elsewhere, however, basis was a train wreck. More empties made it upriver, lowering the cost of shipping corn down the Illinois River to the Gulf by 6.5 cents a bushel. But none of those gains were passed on to farmers. Instead bids continued to weaken as stocks leftover on Aug. 31 were expected to top 2 billion bushels, with 14.6 billion more out in the field. Basis on the Illinois River, where deliveries focus, weakened 11 to 19 cents last week to to under. Still, only 137 lots were delivered today. September freight from Minneapolis south was unchanged, staying at the highest September 1 level since the days of Hurricane Katrina in 25. Carry in the futures market reached its peak from a year ago at 26 cents, as the combination of weak basis and spreads were the market s way of trying to find a home for all the corn that s not needed by the pipeline right now. Soybean basis saw strength in the same areas as corn. But overall basis weakened again sharply into the end of the season, reflecting left over supplies of 4 million or more bushels. Though basis at the Gulf actually was up 3 cents, bids up river fell to the lowest level in more than a decade, with the Illinois River at 6.75 to under September. Processor bids also plummeted, weakening 8 to as much as 26 cents as a drop in soybean meal values lowered crush margins to their lowest level of the summer. Still, crush for July due out later today is expected to set a record for the month at 178 million bushels. Corn and soybean basis typically weaken into harvest, but that pressure is over in wheat, where the only question is whether the need to free up storage space will dump supplies on the market during the gut slot. So far, wheat appears to be avoiding that pressure most places. Some soft red winter wheat bids weakened in early fall harvest areas in the Delta, and deliveries against September were made outside of the main hub in Toledo at terminals on the Ohio River and at New Madrid, Missouri. But hard red winter wheat basis firmed, despite more deliveries in Wichita, while spring wheat basis also firmed. Though exports for wheat are disappointing so far, bids at export terminals firmed, with white wheat off the PNW remaining strong due to the El Nino drought hurting production in Australia. Sorghum basis also firmed despite weakness in corn and the on-going tariffs from China. But stronger HRW basis and lower corn production on the southwest Plains are giving this feed grain a lift too.

2 $.9 $.8 $.7 $.6 $.5 $.4 $.3 $.2 $.1 $- Barge offers to ship corn, Illinois to Gulf, per bu. $.7 $.73 $.76 $.78 $.58 $.53 $.53 $.53 $.52 $.51 $.51 $1.6 $1.4 $1.2 $1. $.8 $.6 $.4 $.2 Cost/Bu. To Ship Corn Illinois River To Gulf $. 9/2/14 11/2/14 1/2/15 3/2/15 5/2/15 7/2/15 9/2/15 11/2/15 1/2/16 3/2/16 5/2/16 7/2/16 9/2/16 11/2/16 1/2/17 3/2/17 5/2/17 7/2/17 9/2/17 11/2/17 1/2/18 3/2/18 5/2/18 7/2/18 9/2/18

3 $.7 $.6 $.5 $.4 $.3 $.2 $.1 $- Cost per bushel to ship grain from St. Louis to Gulf $.49 $.51 $.58 $.56 $.43 $.38 $.38 $.35 $.35 $.35 $.35 Source: St. Louis Merchants Exchange $1.2 Cost per bushel to ship corn to Gulf on Sept. 1 Twin Cities Mid-Miss St. Louis $1. $.8 $.6 $.4 $.2 $.

4 Rail Fuel Surcharges (cents/car/mile) Current Average $.4 $.35 $.3 $.25 $.2 $.15 $.1 $.5 $. -$.5 -$.1 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Source: USDA $3. October rate to ship corn from Minneapolis to Portland, per bushel $2.5 $2. $2.68 $1.5 $1. $.5 $.87 $.86 $.83 $.84 $.86 $.9 $.93 $1.26 $1.1 $.95 $1.36 $1.3 $1.42 $1.56 $1.62 $1.77 $1.53 $1.5 $1.49 $1.49 $-

5 12, Baltic Dry Index 1, 8, 6, 4, 2, ,2. Barge Movements Through Lock & Dam 27 1, tons Corn Wheat Soybean 1, /26 4/26 7/26 1/26 1/26 4/26 7/26 1/26 1/26 4/26 7/26 1/26 1/26 4/26 7/26 1/26 1/26 4/26 7/26 1/26 1/26 4/26 7/26

6 Number of barges Grain Barges for Export in New Orleans Region Downbound Grain Barges Locks 27, 1, and 52 Grain Barges Unloaded in New Orleans 2 Source: U.S. Army Corps of Engineers and GIPSA Number of Barges Upbound Empty Barges Locks 27 Lock 1 Locks 52 Source: U.S. Army Corps of Engineers -

7 Corn Basis Illinois River Corn Basis 2 1 (1) (2) (3) (4) (5) (6) (7) 9/1 11/1 1/1 3/1 5/1 7/1 Average (1) (2) (3) (4) (5) (6) River System Corn Basis 9/7 1/7 11/7 12/7 1/7 2/7 3/7 4/7 5/7 6/7 7/7 8/7 Average

8 2 Eastern Corn Belt Corn Basis 1 (1) (2) (3) (4) 9/7 11/7 1/7 3/7 5/7 7/7 Average Omaha Corn Basis (2) (4) (6) 9/6 11/6 1/6 3/6 5/6 7/6 - (5) (1) (15) (2) (25) (3) Average

9 Western Corn Belt Corn Basis (1) (2) (3) (4) (5) (6) (7) 9/7 11/7 1/7 3/7 5/7 7/7 Average Gulf Corn Basis 9/6 11/6 1/6 3/6 5/6 7/6 Average SOURCE: USDA, CBOT.

10 Soybean Basis Illinois River Soybean Basis 4 2 (2) (4) (6) (8) 9/1 11/1 1/1 3/1 5/1 7/ Average Gulf Soybean Basis /6 11/6 1/6 3/6 5/6 7/ Average

11 Eastern Corn Belt Bean Basis 2 1 (1) (2) (3) (4) (5) (6) 9/7 11/7 1/7 3/7 5/7 7/7 Average River System Bean Basis (1) (2) (3) (4) (5) (6) (7) 9/7 11/7 1/7 3/7 5/7 7/7 Average

12 Western Corn Belt Bean Basis (1) (2) (3) (4) (5) (6) (7) (8) (9) 9/7 11/7 1/7 3/7 5/7 7/7 Average North Central Iowa Soybean Basis (1) (2) (3) (4) (5) (6) (7) (8) (9) (1) 9/6 11/6 1/6 3/6 5/6 7/6 Average SOURCE: USDA, CBOT.

13 Wheat Basis Louisiana Gulf Soft Red Wheat Basis 6/7 8/7 1/7 12/7 2/7 4/7 Average Toledo Soft Red Winter Wheat Basis /7 8/7 1/7 12/7 2/7 4/7 Average

14 Hard Red Wheat Belt Basis 4 2 (2) (4) (6) (8) (1) 6/1 8/1 1/1 12/1 2/1 4/1 Average Minneapolis Spring Wheat Basis (1) (2) 6/7 8/7 1/7 12/7 2/7 4/7 Average

15 Salina Wheat Basis (2) (4) (6) (8) (1) (12) 6/1 8/1 1/1 12/1 2/1 4/1 Average Texas Gulf Hard Red Wheat Basis (2) (4) 6/7 8/7 1/7 12/7 2/7 4/7 Average

16 West Coast HRW Basis /7 8/7 1/7 12/7 2/7 4/7 Average PNW White Wheat Basis (2) 6/7 8/7 1/7 12/7 2/7 4/7 Average