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February 2010 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.

 

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.

Cash Grain Basis Firmer

Feb 03, 2010

While grain futures continued to slide lower this week, basis levels around the country posted solid gains. For the week, both corn and soybean basis levels were up 3 cents on average across the country.

 

Corn basis levels posted solid gains throughout much of the country. Barge rates slipped a few cents over the last week along the Illinois and Ohio River, which helped lift basis levels. But, ethanol plants also helped contribute to strong basis gains. Gains of 5 cents or more were fairly typical for ethanol plants. Although areas in the Northern Plains and Upper Midwest are somewhat lagging and still seeing weak basis levels thanks to a very late harvest.

 

 

For soybeans, basis levels saw similar gains as the corn market. The US average gain was 3 cents a bushel, with soybean plants bidding up basis.

 

 

The carry in the cash market continues to favor corn storage at most markets across the country. Average cash forward contract carry in the corn market is 21 cents per bushel for 4 months of storage. In soybeans, the carry is much less favorable giving farmers little incentive to store soybeans.

 

Average Cash Forward Contract Carry for Corn

State

Mar

Apr

May

Jun

Jul

IA

1.9

6.3

9.1

14.6

16.3

IL

5.0

9.7

13.4

19.8

22.9

IN

5.2

13.8

18.5

26.8

27.9

KS

2.5

12.5

15.0

18.8

21.0

MN

2.3

8.7

10.9

17.1

18.3

MO

3.3

9.2

14.6

21.3

21.7

ND

2.7

14.9

19.5

27.4

29.7

NE

2.6

6.7

10.2

14.8

18.2

OH

6.3

15.3

20.3

27.1

29.8

SD

5.1

10.8

15.9

20.3

23.9

WI

4.3

12.2

14.4

20.5

20.7

.

 

Average Cash Forward Contract Carry for Soybeans

State

Mar

Apr

May

Jun

Jul

IA

-1.8

5.8

8.1

14.8

15.8

IL

-0.9

3.9

6.3

10.1

15.4

IN

-0.5

2.7

3.4

8.2

10.3

KS

-1.5

-4.5

-3.7

1.9

2.2

MN

-3.2

0.7

2.1

9.0

9.7

MO

-1.6

2.8

1.6

6.0

8.3

ND

-0.1

-5.1

-6.7

-0.2

-0.8

NE

-3.8

3.0

4.7

16.7

12.2

OH

0.3

6.7

9.0

15.9

11.4

SD

2.2

5.4

5.3

9.6

4.8

WI

3.1

15.0

17.8

24.5

23.9

 

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