This week spot corn basis remained unchanged throughout the country despite basis dropping seven cents at the Gulf. Support was given to the market by ethanol plants that increased their basis a penny on the week. Even though the export market did little for corn, basis for spot soybeans increased four cents triggering a one cent gain on average throughout the country.
Turning attention to new crop, we are also seeing strong basis levels that are at least eight cents higher than the five year average. Not only do current basis levels sit well above the five year average but they are making steady gains beyond the maximum basis seen for this time period in the last five years. Although new crop basis is rising to seasonally uncharacteristic levels, historical analysis would suggest that basis has the capacity to continue improving at least for the foreseeable future.
However, we have observed anomalies to this tendency. The most notable example was 2010 when basis declined sharply from July until harvest. During that year the production expectations were high, producers planted early and we had ideal growing conditions up until the grain filling period. These expectations impacted basis negatively from July until harvest.
The basis events in 2010 provide a warning to producers for the 2011-12 marketing year as to the potential effects that bumper crop expectations have on new crop basis. Though we expect new crop basis to maintain its strength going into planting and pollination, we would warn producers that July will mark an important pivot point to this trend. If 94 million acres are planted to corn this year and weather is cooperative, new crop basis could face strong headwinds in the second half of the growing season.
