Cash Grain Commentary by Cash Grain Bids Inc

Basis Recovery?

With prices low farmers are focusing on the fields rather than on marketing. The corn harvest pushed past the half way point this week, with 65% of the crop now harvested. Corn cash sales have been slow this week, with storage constraints pushing some to sell into a tough market. This year's larger than expected soybean crop is nearly harvested. With bins at full capacity, recent corn sales are being stored on the ground at many elevators. December futures were uninspiring as they continued their slow downward trend this week, hitting a new contract low, closing just below 2 dollars. Volatility in the market has been very limited, with futures trading within a 10 cent range for the past six weeks.

Basis was mostly unchanged or stronger this week across the country. Southern corn states, from Northern Louisiana up to Southern Illinois saw a slight increase in basis this week. Parts of Minnesota and Wisconsin saw their already low basis fall even further. The majority of the country saw basis stabilize, and this could be an optimistic sign that basis is beginning to bottom out. On the other hand, this could be the calm before the storm. Once corn harvest is complete and we see more corn moving through the system we could see basis driven downwards again.

Basis dropped off two cents at the gulf this week, but is still up over 20 cents from the previous month. Weekly exports numbers were slightly below trade expectations at 39.76 million bushels, however the percentage of total weekly export inspections for this time of the year is in line with the five year average. Barge rates dropped 20% this week, coming down off of last week's record highs. Lower rates helped basis at markets along the river, such as Davenport and East St. Louis where basis climbed dramatically. Indiana also saw large basis gains, with Mount Vernon and Evansville increasing basis by19 and 20 cents respectively.

Corn Basis For Select Markets
City	State	Current	One Week Ago	One Month Ago
Clinton	IA	-34	-25	-19
Coon Rapids	IA	-58	-58	-55
Davenport	IA	-36	-45	-41
Eddyville	IA	-32	-29	-27
Bloomington	IL	-33	-40	-44
East St Louis	IL	-11	-32	-28
Mendota	IL	-41	-47	-37
Pekin	IL	-31	-21	-24
Evansville	IN	-13	-33	-25
Mount Vernon	IN	-14	-33	-31
South Bend	IN	-29	-28	-33
Gulf	LA	60	62	39
Bingham Lake	MN	-60	-60	-62
Marshall	MN	-54	-52	-40
Albion	NE	-55	-56	-55
Columbus	NE	-40	-39	-36
Toledo	OH	-47	-51	-42
Big Stone City	SD	-55	-55	-64
Chancellor	SD	-52	-52	-57

Some of the large processors and ethanol plants appear to be raising the basis more than their regional averages. There are select elevators and grain merchandisers - probably those with sufficient storage - that are more bullish on price. It is interesting to note, that the average basis of ADM, Cargill, CGB, and Bunge, all increased this week. Basis increased an average of 3.2 cents across all of the Cargill locations that we track. This was the smallest increase of the four major players. CGB had the largest increase, with their average basis level climbing 7.4 cents this week.

Basis numbers this week appear to offer a trace of hope that we could be on the verge of a recovery. However, cash sales have been slow, and there is still a large amount of corn to be harvested. We will need considerable more evidence before we can conclude that this is truly the bottom. It is hard to imagine that this year's 10.6 billion bushel corn crop can be absorbed into the system without basis being depressed well past harvest.