Basis continued to climb throughout most of the country this week, despite a bearish USDA report. Corn export inspections were cut, pushing ending stocks up to 2.5 billion bushels. The stocks-to-use ratio now sits at 22.5%, up nearly 3% from last year. Corn exports fell just short of trade expectations this week coming in at 33.3 million bushels. Cumulative exports are now at 26% of the USDA export forecast for the year, still nearly 3% above the five year average for this time of the year.

Corn basis increased the most in central South Dakota and Minnesota, where basis was up more than 5 cents this week. In the North East basis was also strong, gaining anywhere from 2.5 to 5 cents on average. Apart from an area of weakness in southern Texas and along the river in Illinois, basis was mostly unchanged or a few cents higher throughout the rest of the country.

Looking at several key market across the country it is apparent that many areas have seen significant gains in basis this month. Basis at the Clinton and Eddyville ethanol plants gained 17 and 32 cents respectively this month. Both of these plants are now offering a basis higher than last year. With trucking costs also falling, down 20% from last month and down 13% from last week, elevators near these ethanol plants are having to raise their basis as well in order to maintain their grain flow.

Along the river, basis has been increasing at a much slower rate than the rest of the country, and this week it actually decreased at many elevators. It is not surprising that river basis is decreasing, as cold weather and ice on the river is beginning to slow or stop much of the grain traffic. Barge rates are now up 33% from last month, with a 30% increase in the past week alone. At Pekin, Illinois, a river market, basis has fallen in the last week and is now the same as last month's basis.

The USDA reduced their soybean export forecast as well, pushing the soybean stocks-to-use ratio up to 14%. Analysts overestimated soybean inspections again this week. Inspections of 25-34 million bushels were expected, but Monday's report revealed only 16.6 million bushels. Despite the lower USDA forecast, cumulative inspections are still only 33% of the forecast for the season, while the five year average for cumulative exports is 40% of the forecast for this time of the year.

Despite the bearish news soybean basis increased this week, though slightly less than corn basis. Wisconsin, western Minnesota and the Dakotas saw some of the strongest gains in soybean basis, up 2.5 to 5 cents. Basis in Illinois was down the most dramatically, with the average basis along the river dropping between 2.5 and 5 cents.

Soybean basis has increased for the month at most key markets across the country. However, some weakness is creeping in and with the declining basis this week both Davenport and Burns Harbor and now offering a lower basis than last month. Basis at both of these markets is significantly below last year's basis. Weak exports have not helped basis at the gulf, where basis is only 3 cents higher than last month.

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