Corn futures continued to climb this week, as exports remained strong. This weeks export inspection numbers came in at 44 million bushels, significantly above analyst expectations of 30 to 36 million bushels. Additionally, the pace of exports is faster than the average. Cumulative exports are now 28.6% of the USDA forecast for the year, while typically at this point in the season cumulative exports are only 25.1% of the year's forecast. Soybean markets have also seen a large rally this week, which has supported corn prices.

Basis has been somewhat mixed, with most of the country seeing basis unchanged or marginally higher this week. Iowa's basis, however, moved lower through out much of the state. Basis has been strengthened this week by strong demand and slow cash sales. Cold weather and the impending holidays has many farmers holding tight to their grain. Transportation costs, on the other had, were mostly higher this week putting negative pressure on basis. Barge rates continued to rise, increasing 13% this week. Trucking rates reversed their trend and moved higher this week by 13% as well.

Our index of Key Companies indicates that three out of the four major merchandisers all increased basis this week. The average basis at ADM and Bunge, across all of their facilities that we track, increased 3 cents. Cargill was just below that, increasing basis by 2.5 cents. Consolidated Grain and Barge, with more of their markets in the South, actually decreased basis by half a cent.

Looking at select market it is apparent that Iowa saw basis dip this week. Nearly all of the Iowa markets listed below had a lower basis. Eddyville gave up 4 cents, while Clinton and Coon Rapids each lost a penny this week. East of Iowa, basis improved this week. Bloomington and Mendota each gained 2 cents and in Indiana and Ohio basis was up several cents at most markets.

The graph below depicts average monthly corn basis, with basis being calculated off of the nearby contract. At this time of the year corn basis tends to be flat from now until February. In some years, the November rally in basis comes slightly later and at a slower pace. As a result, basis continues to slowly climb through December and January. While this year's basis is still well below average, at roughly -30 for the month of December, we have seen the average US basis rise nearly 20 cents in the past month. It seems likely that basis will only climb slowly or perhaps be flat from now until February.

Some caution is needed when looking at this graph. The effect of futures contracts rolling over in March and May make it difficult to directly compare basis between months that are not calculated using the same futures contract. What is useful to look at is the year to year comparisons. Last year, with a large crop already in the bins and the size of this year's crop being forecasted, basis dropped below average after February. Currently basis has not been this low since 2000. In 2000, basis was below average and never managed to match the average. With two years of above average production, it seems likely that this year will be similar to 2000, with basis never returning to the average.

With help from both futures and basis cash prices continue to rise. Futures are just beginning their rally, but it would appear as though basis has hit the top. While basis could gain a few more cents in the next month, it probably won't cover the cost of storage. If you need to lock in basis in the near term you may want to move sooner rather than later. If you can hold off, you may want to wait until February, when basis typically sees the next big rally. Enjoy the holidays but keep a close eye on basis, with cash sales slow and demand high you may be able to find elevators paying a substantial premium to get your corn.

Merry Christmas and happy holidays from CashGrainBids.com

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