Soybeans traded in the seven dollar range last week, but with cooler weather and rain in the forecast for early July. funds liquidated their long positions and nearby futures dropped 50 cents Monday. Corn futures also traded at near limit levels on news of the improved weather. (Corn commentary follows soybean comments.)

We have seen a strong futures market the last few weeks and basis has declined as producers sold into the rally. The map below indicates the average change in basis over the past month. Basis fell considerably in Minnesota and North Dakota, while basis in Illinois continues to hold strong due to possible record level drought conditions.

Looking at key soybean markets accross the country (see the table below) it is apparent that much of this month's decline in basis came last week as futures reached new highes. Cedar Rapids and Davenport both shed 4 cents this past week, and basis at the gulf was down 8 cents.. This is due in part to waning export demand. Export inspections were at about 4.8 million bushels this week, which is roughtly half of last week's numbers.

It is hard for producers to get excited about a 50 cent decline in future, but as futures and basis tend to move in opposite directions we may see a slight increase in basis in the coming week. Traders were expecting good to excellent crop condition scores to be down 1%-2% nationwide. Monday's crop condition scores, released after the close, were close to or below expectation at 59%, down 4% from the previous week. Depending on rain forecasts the futures market could go either way this week and so it will be important to watch your local basis. If you closely monitor basis you may find that Monday's downturn can work to your advantage, with a chance to lock in an attractive basis on a hedge to arrive or basis contract.

Corn futures have been volitile this past week, with a 10 cent decline on Monday. An increased chance of rain pushed both corn and soybeans lower. Monday's good to excellent crop condition scores were at 65%, down three percent from last week, but in line with trader expectation.

The map below display the monthly change in corn basis. Basis has been strong in the East, and Illinois has actually seen basis climb as much as 5 cents in spots. The largest declines in basis have been in South Dakota and Minnesota. Corn basis has held up fairly well due to falling futures over the last few days as well as decreasing ocean freight rates. The U.S. Gulf to Japan rate is down 15% from May, the lowest rate since November, 2003.

The table below the map highlights corn basis at key markets accross the country.