Soybean Carry Vanishes
Most of this month, soybean futures have traded up and down within a 30
cent range. But this week, prices closed lower, hitting a new low for the
month. Export numbers met analyst's expectations this week, coming in at
34.2 million bushels. The pace of exports, however, continues to lag
behind the historical average. Cumulative inspections are now 24% of the
USDA forecast for the season, compared to the five year average of 31% for
this time of the year. If this slow export pace continues, the USDA may be
pushed to lower their export forecast in coming months. Weather in South America continues to play on the market. Planting
progress is now at 46% and 62% complete in Argentina and Brazil
respectively. Northern Brazil received some much needed rain this past
weekend, and more rain is in the forecast. Weather premiums are already
built into the market, as traders predicted dry conditions across most of
Argentina and Brazil. Increased moisture could quickly erode the weather
premium, pushing futures lower. While futures have stumbled, basis has been strong, pushing up cash
prices for many producers. In most all of the major soybean producing
states, cash prices are higher this month than last. On average, cash
prices are up 26 cents across Iowa. Prices rose 20 cents in Illinois and
sixteen cents in Indiana. For all three of these states, the current price
is now higher than last year's price. Lower transportation costs continue to help basis. Both rail and
trucking rates were down this week, with trucking rates falling 3%.
Trucking rates are down 17% compared to last month. Barge rates edged up
5% this week but are still down 42% from last month. In recent weeks,
river locations have experienced the strongest increases in basis. This
could come to an end if barge rates have bottomed and are now moving
higher. Last month, as the harvest pushed towards an end and corn was being
piled up on the ground, cash prices were 15 to 30 cents lower. Elevators,
lacking storage, were offering significant premiums for deferred delivery.
In many cases it was possible to lock in 20 to 30 cents of carry by
contracting into January or March. With low spot prices, the majority of
farmers decided to hold their grain and wait for a price recovery. Now a
month later, basis has been bid up as elevators attempt to entice farmers
to sell. While spot prices have moved higher, forward delivery prices have
not. There is currently a positive 7 cent spread between January and March
soybean futures, however, carry in the cash market is nearly gone and in
some cases it is now negative. In Illinois there is no premium for
contracting into December or January and in Iowa soybeans contracted for
December and January are selling for three and six cents less than the
spot price. Carry is also negative in Arkansas, Missouri, and Ohio. sales@cashgrainbids.com
State
Current
Last Month
Last Year
AL
525
532
525
AR
572
544
562
IA
536
510
528
IL
554
534
546
IN
546
530
534
KS
512
509
502
KY
560
529
555
LA
560
554
559
MI
526
523
516
MN
523
500
526
MO
544
520
524
MS
543
527
547
NC
541
542
522
ND
510
506
509
NE
523
508
510
OH
537
527
527
OK
524
516
519
PA
514
523
497
SD
514
496
514
TX
492
494
484
WI
512
499
514
State
Dec
Jan
Feb
Mar
AR
-3
-7
-5
-8
IA
-3
-6
-4
0
IL
0
0
1
2
IN
0
0
1
3
KS
0
0
8
12
KY
3
4
5
3
MN
1
2
5
8
MO
-2
-2
-3
-3
NE
1
0
6
9
OH
-2
0
-1
-4
OK
0
13
7
7
SD
2
6
7
8
Grain elevators want you to sell your
grain today. They are actively bidding up their basis to draw grain off
the farm and into the elevator. They are no longer offering any incentives
for storing grain. If farmers continue to hold out for higher prices
soybean basis could move even higher, but with negative carry in the
market it becomes considerably more risky to store your grain. At some
point producers will start selling their grain to take advantage of the
recent increase in basis. This could cause basis to move lower again. It
is a tricky balance. You can hold out for an even higher price, but you
definitely do not want to be the last one standing in line at the elevator
if everyone else decides to sell.
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