The Grain Hedge Team provides a macro-focused daily view of the world’s grain markets. Kevin McNew received a bachelor’s degree from Oklahoma State University and his master’s and Ph.D. degrees in Economics from North Carolina State University. He spent 10 years as a Professor of Economics with the University of Maryland and Montana State University focusing on commodity markets and is widely regarded for his ability to boil-down complex economic situations into easy-to-understand concepts for applied life.
Barge Rate Slump Helps Lift Basis Levels
Feb 17, 2010
Corn and soybean basis levels continued to make positive gains this week, as corn moved 2-cents higher across the country while basis levels were up 3 cents a bushel across soybean buyers.
Helping fuel the gains of late has been a sell-off in the cost of barging grain down the river system. Over the last week, that barge costs has slipped 6 to 9-cents a bushel along which in turn makes it more profitable for river terminals to bid on grain. As a result, basis levels for corn and beans were notably stronger in Illinois & Iowa.
However, little outside stimulus seems to be occurring from other end users of grain. Ethanol plants as a group were up 2 cents for the week, on par with the average gains across the rest of the U.S while soybean plants were up 2 cents as well, just slightly off the 3-cent gain of the U.S. average.
Some corn buyers are starting to return to the market in the Plains and Upper Midwest. After having their bins full and their basis levels plummet, we are seeing some buyers begin to offer competitive basis bids again to attract grain. Although futures prices have recovered a bit off of their recent lows, we wouldn’t this correction to lead to hefty cash sales by farmers so end-users may be forced to push basis higher as their needs dictate. Look for continued gains in the cash basis market.