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October 2009 Archive for Cash Grain Insights

RSS By: Kevin McNew, AgWeb.com

Kevin McNew is President of Grain Hedge and Geograin. McNew was raised on a farm in central Oklahoma and received his bachelor’s degree from Oklahoma State University, and master’s and Ph.D. degrees in Economics from North Carolina State University. For over a decade, he was a Professor of Economics at the University of Maryland and Montana State University, focusing on commodity markets. He has received numerous academic awards for his research and outreach work, and was (and still is) widely regarded for boiling down complex economic issues into easy-to-understand concepts for applied life.

 

Slow Harvest Pace Keeps Basis Levels in Check

Oct 21, 2009

Another incremental week of grain harvest kept basis levels slightly weaker, but still holding relatively firm. Corn harvest went from 13% completed to 17% finished this past week, while soybeans went from 23% to 30% over the week. Basis levels were off 2 cents a bushel for both corn and beans, but much of the weakness was confined to areas along the River system.

 

Both corn and beans saw weaker basis at the Gulf for the week, with corn off 3 cents and beans off 4 cents. Further upstream at hinterland river terminals, grain basis was weaker still by 5 to 10 cents a bushel at most markets. A combination of harvest and slightly higher barge rates put pressure on these markets. However, the bulk of the harvest pressure still lies in wait. Other end-users continue to keep basis levels firm. On average, ethanol plants across the country were unchanged on corn basis for the weak, while the U.S. corn was 2 cents a bushel weaker.

 gograin.com

 

gograin.com

 

Weather will continue to control the pace of harvest. The outlook still calls for intermittent rains throughout the bulk of the Midwest, especially in the Plains and Western Cornbelt for the coming days. By the weekend, the outlook appears more promising for harvest progress.

 

Harvest Pressure Hits Cash Markets

Oct 07, 2009

Grain harvest is later than normal and off to a slow start with scattered rains, but basis levels are starting to feel the pressure. Many elevators reported receiving heavy deliveries of corn in recent days, and moisture content was high forcing merchants to slow down receipts. For the week, corn basis was off 2 cents on average while bean basis was off 5 cents.

 

At the Gulf, corn basis was off 6 cents a bushel which caused similar declines along the River terminal markets in Missouri, Iowa, Illinois and Indiana. Many parts of the country were only a few cents weaker, and sections of the Western Cornbelt remained mostly unchanged with harvest yet to hit.


 

For soybeans, Gulf basis was off sharply, losing 25 cents on the week which took its toll on interior River basis levels. As harvest starts to take hold, many Eastern Cornbelt markets saw double-digit losses on basis as well.

 

 

Continue to expect basis levels to come under heavy pressure in coming weeks. Basis levels had been running exceptionally high because of the delayed harvest and farmers holding tight to old-crop supplies. But, ample new-crop supplies and a recent jump in futures price on frost scares should keep deliveries heavy to local markets. We look for a quick and steep drop in basis as bin space should be at a premium this Fall.

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