Beating the Basis

Corn futures gave up over ten cents a bushel last week, closing at $2.11 on Friday. The USDA June supply and demand report indicated that supply and demand projections were unchanged for corn. The report had little effect on the market and weather concerns continued to drive trading. Tropical storm Arlene was expected to bring rain to dry areas in the East over the weekend. Initial reports indicate only isolated showers, and overnight trading on the e-CBOT pushed the July contract up 3 cents.

Corn basis was unchanged or higher at most locations across the country. Basis, did however, drop a penny at the Gulf as exports were down 25% from the previous week. Illinois saw a dramatic improvement, with a 4 cent increase at Bloomington and a 5 cent increase at Mendota.

Last weeks declining futures helped push basis closer to last month's levels for many regions. The map below displays the change in basis over the past month. Basis declined 5 to 10 cents in Eastern Iowa, while Western Iowa, experiencing wet weather only saw declines of 0 to 5 cents. Basis improved to the South with increases of 5 to 10 cents in areas of Kansas.

Basis dropped as much as 10 to 15 cents in areas of South Dakota. These regional pockets of poor basis illustrate the importance of trucking grain and seeking out premium markets. While trucking opportunities typically decline after planting, as more farmers have the time to aggressively truck their grain, it is still worthwhile to closely monitor the cash market.

Nearby soybean futures traded lower at the beginning of last week, and despite gains later in the week the contract closed down nearly 25 cents. The USDA's June supply and demand report showed a lower than expected ending stocks for new crop soybeans of 255 million. Strong crush numbers, (up 25 million) and strong exports (up 10 million) were responsible for the report's adjustment. USDA warnings over the weekend have heightened fears of tropical storm Arlene spreading soybean rust spores, and in early trading on Monday the market is up nearly 20 cents.

Soybean basis was mixed across the country last week. Key markets in Iowa and Illinois were mostly unchanged, however basis at the gulf slid 4 cents a bushel. Basis has been strong to the South and East. The map below shows the change in soybean basis over the past month. Export locations, and those regions experiencing weather difficulties have seen basis climb about 5 cents. Basis dropped 10 to 15 cents in most of Iowa and Southern Minnesota.

Trucking opportunities appear more prevalent with soybeans. Producers in areas of weak basis will find it profitable to truck grain out of their local region. With basis differences of over 20 cents producers can truck grain as much as 100 miles and still capture a few extra cents a bushel. Considering that nearby futures prices are up an average of 42 cents a bushel, and basis is holding up fairly well it may be time to push some sales through as the market's weather and rust premium increases.

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