Big Soybean Yields Pressure Basis

October 20, 2015 05:00 AM
soybean harvest2

Better-than-expected soybean yields have been good news for farmers, but the increased supply this harvest is keeping a lid on basis, says Brian Hoops, president of Midwest Marketing Solutions in Springfield, Mo.

“We’ve got plenty of supply--I think actually more than the market had been anticipating at this time,” Hoops says. “Because of that, we’ve seen some weakness in basis.”  

In Iowa, USDA reported the state average price of soybeans at 62 cents under the CME November soybean contract. A month ago, the state average basis was only 45 cents under the board. Corn basis, meanwhile, weakened only slightly in the last month to 38 cents under CME December corn futures versus 36 cents under the board in mid-September.  

Jerry Gulke, president of the Chicago-based Gulke Group, agrees that better-than-expected soybean yields are pressuring cash values and holding down soybean basis while corn basis improves amidst more variable yields in the eastern Corn Belt.  

Farmers have reported soybean yields significantly above their APH, by as much as 10 bu. to 15 bu./acre, Gulke noted in the latest Weekend Market Report on Farm Journal Radio. Hoops adds that his farmer clients also have reported “amazing” soybean yields despite the excessive rainfall and flooding that plagued parts of the Midwest earlier this year.

Soybean basis, though, still has some minor supportive features, according to Hoops. Those include a brisk shipment pace and a strong domestic crush rate.

Cumulative soybean export inspections of Oct. 15 were tallied on Monday at 252.1 million bushels for the current marketing year as, up from last year’s shipment pace of 219.5 million bushels, according to USDA. Meanwhile, the National Oilseed Processors Association, or NOPA, also reported last week the fastest crush pace for the month of September since 2007 with members crushing 126.7 million bushels.  

“It’s a little bit of a supportive feature to the basis, but the overall demand compared to last year or even the last couple years has been pretty slow and pretty lackluster,” Hoops adds.  

Total soybean export sales for the marketing year are currently tallied at 860 million bushels, USDA reported, with this year’s sales pace lagging last year by 263 million bushels, indicating that a slower shipment pace will unfold later in the year. USDA currently forecasts total soybean exports for 2015-2016 at 1.675 billion bushels, down from last year’s exports of 1.843 billion. Crush is pegged to be slightly higher at 1.880 billion bushels in 2015-2016, up 5 million bushels from last year.

Both Hoops and Gulke anticipate that with farmers reporting improved yields this fall, USDA will push their 47.1 bu./acre soybean yield estimate higher in future Crop Production reports, with higher carryout expect to follow suit.

“The last government report said 425 million bushels of ending stocks for beans,” Hoops says. “And I could certainly see that increasing to 450 [million] to 500 million when we get to the January final supply numbers, and that won’t be good for future soybean basis if that happens.”

Hoops, though, stresses that farmers should still keep on the lookout for regional improvements in basis in the months ahead.

“We’ve seen a really strong crush throughout 2015, and there’ll be times when we’ll see an increase in crush demand,” Hoops points out. “I think that’s when we’ll see the best basis levels, but it won’t last long. It’ll be more regionalized and very short in nature.”  

What is soybean basis in your area? How does that compare to the past? Let us know in the comments.

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