Cash Grain Commentary @ CashGrainBids.com

Cash Grain Commentary by Cash Grain Bids Inc

Bottoming Barge Rates Boost Basis

Corn exports were lower than expected this week, at 34.3 million bushels. Currently exports are running 12.7 million bushels behind last year's total. In addition to weak exports the market traded lower on fears of an increased USDA production forecast, due to be released on Thursday.

While futures have slipped over the past week, corn basis has rallied nicely. With 90% of the corn crop harvested and basis on the upswing it appears as though we are moving back into the seasonal upward trend that basis normally experiences at this time of the year. Lower truck, rail and barge rates are also helping to push basis back up from the bottom. Barge rates are down 36% from last month, falling 23% this week alone. The dramatic decrease has particularly helped basis along the river, where many locations have increases basis by over 15 cents in the past month.

Much of this month's increase in corn basis has come very recently, corresponding to the drop in barge rates. All of the Iowa markets listed below were up substantially this week, with Clinton and Davenport each gaining 12 cents. Illinois markets were also higher, while Indiana was mostly unchanged after having rallied the week before.

Corn Basis For Select Markets
City	State	Current	One Week Ago	One Month Ago
Clinton	IA	-16	-28	-22
Coon Rapids	IA	-46	-56	-56
Davenport	IA	-19	-31	-46
Eddyville	IA	-28	-32	-28
Bloomington	IL	-28	-28	-42
East St Louis	IL	8	1	-42
Mendota	IL	-21	-28	-39
Pekin	IL	-9	-22	-25
Evansville	IN	0	1	-45
Mount Vernon	IN	-1	0	-54
South Bend	IN	-30	-30	-28
Gulf	LA	49	58	44
Bingham Lake	MN	-58	-56	-60
Marshall	MN	-43	-48	-46
Albion	NE	-45	-52	-56
Columbus	NE	-31	-37	-34
Toledo	OH	-42	-47	-43
Big Stone City	SD	-50	-54	-55
Chancellor	SD	-46	-49	-55

Soybean basis has also improved along the river, but moving past the river system soybean basis is unchanged or lower than the month before. Brazil experienced some needed moisture this week, adding to traders concerns about US exports. Brazil's strong currency may hamper their exports, but many large buyers like China are sitting on the fence. Traders are asking themselves if China will go North or South to buy their soybeans?

The most recent soybean export inspections were below trade expectations at 33 million bushels rather than analyst expectations of 37-45 million. Declining soybean futures could trigger additional sales, but cumulative export inspections are currently at only 17.4% of USDA projections for the year, as compared to 23.7% for the 5 year average. Weak exports contributed to weak basis at the Gulf, where basis fell more than 10 cents this month.

While this past week was a banner week for corn basis, soybean basis was hit hard. Locations further from the river saw basis decline the most. Basis at Lincoln and Hastings was down 10 and 17 cents respectively. Markets to the East, well off of the river were also hurt. Raleigh dropped 20 cents, and Toledo and Zeeland were both down more than 10 cents this week.

Soybean Basis For Select Markets
City	State	Current	One Week Ago	One Month Ago
Cedar Rapids	IA	-50	-47	-56
Davenport	IA	-41	-50	-57
Des Moines	IA	-38	-36	-47
Bloomington	IL	-31	-6	-25
Danville	IL	-26	-18	-21
East St Louis	IL	-16	-21	-52
Galesburg	IL	-28	-19	-38
Quincy	IL	-24	-18	-25
Evansville	IN	-23	-16	-52
Mt Vernon	IN	-26	-17	-56
Gulf	LA	31	40	43
Zeeland	MI	-48	-33	-33
Mankato	MN	-51	-75	-65
Raleigh	NC	-20	-0	9
Hastings	NE	-57	-40	-51
Lincoln	NE	-38	-28	-46
Toledo	OH	-45	-34	-28
Volga	SD	-72	-64	-63

Basis typically tends to be in an upward trend at this time of the year. This week transportation costs and exports are battling opposite of each other to see which will influence basis. In the case of corn lower transportation costs won pushing basis up. Barge rates could not beat back low soybean exports and basis fell. In the coming week watch for the release of the USDA production forecasts. Traders are already anticipating the second largest crop in history. If basis continues to rise in the face of a bearish USDA report it may be a signal that basis has indeed bottomed and is on its way up.