The combination of slower barge traffic on the Mississippi, slower rail movement and increasing harvest pressure have combined to pull cash grain prices down in the central and eastern corn belt as the basis has collapsed, that is a stark contrast to the west.
Last year at harvest farmers saw some of the strongest basis and cash prices in years, but that’s not the case in the central and eastern corn belt this fall. Basis is collapsing partially due to lower barge movement with Mississippi water levels the lowest since 1988. Nick Tsiolis, is the founder of Farmer’s Keeper, specializes in helping farmers with cash grain marketing. He says cash basis has fallen apart at river terminals. “If you’re looking anywhere in aggregate markets around the river that are feeding it or certainly directly on the river we’ve seen that wide out quite a bit.”
In areas like Decatur, Illinois soybean prices at area processing plants were at $16.64 on September 20, with basis $1.84 over the board. But the cash bid on October 5 was down by $3.00 to $13.64, with a negative 10-cent basis. Tsiolis says its not a surprise with less barges moving and higher barge freight rates. " I think its about $3 right now to load a barge and get it out of the CIF to St. Louis so it make sense as we see those effects pushed out into wider markets that that would be there.”
And Tsiolis says this market environment could last for a while this fall as the prospects are not good for any improvement in water levels on the Mississippi. “I also think producers need to ready for a compounding effect there because not only is a lack of rain going to cause river levels to stay low but its also gonna make harvest continue progressing faster and faster here.”
Cash basis levels haven’t broken as much in the west due to the grain deficit in drought areas. Cash basis was historically strong there all summer and that continues so far this fall, even amidst harvest. USDA shows Kansas corn basis ranging from a positive 40-cents to as high as $1.50 above the futures in the south.
Daniel O’Brien, Kansas State University Ag Economist says end users are bidding up grain prices. “The livestock feeders, ethanol plants, some of those exporters as well trying to scramble for supplies.” And he says that problem won’t ease anytime soon. “What happens from March to August, September when we’re waiting for new crop at that time? We’ll have to supplement our supplies with out of state corn.” Tsiolis says they’re already moving lower priced grain to deficit areas of the west as the strong cash bids are attracting grain to those markets.
From a marketing perspective, Tsiolis says farmers in areas that have seen a substantial drop in cash prices may have to store their crop and wait for basis to improve as eventually the strong basis in the west will lift levels farther east. Or they can find an end user in those drought areas to sell to.
