Both corn and soybean futures rallied in the last week. Corn futures, after moving lower at the beginning of the month, are now back up to end of the year highs. Soybeans, keep moving higher as well, but are still off 30 cents from their January 1st highs. The cash market is also favoring corn, as basis narrowed across the country pushing cash prices up above January levels for most producers. Soybean basis, on the other hand, has been relatively weak this month, and cash sellers have had to suffer the full force of lower futures.

The Eastern Seaboard has seen the largest gains in corn basis this month. Strong gains in the East is not surprising. Production in the Pennsylvania and Virginia region was 15% below last year. With lower production this year, commercial stocks are being used up, forcing elevators to raise basis to pull in more grain. In the Midwest, basis was up over 5 cents throughout Iowa, Minnesota and Wisconsin. Along the river, in Illinois, basis was up over 10 cents this month. Barge rates declined by roughly 6% this month, and River terminals pushed up basis in order to supply export demand at the Gulf.

There is considerably more red when looking at the soybean map. In the far north, across Wisconsin and Minnesota, basis widened by as much as two and a half cents. Through most of the the other soybean producing states, basis was unchanged or only a penny or two higher this month. The only real strength in the soybean cash market was seen on the coast in the South.

Exports explain much of the recent differences between corn and soybean basis. Monday's corn export inspection of 36.1 million bushels was above analyst expectations of 28 to 34 million bushels. This surprise followed Friday's bombshell sales numbers that pegged weekly corn sales at 85 million bushels as compared to analyst expectations of 40 million bushels. If corn exports continue at this pace, the USDA may need to move up export forecasts again.

Soybean exports on the other hand continue to disappoint. Weekly export inspections were 1.9 million bushels compared to analyst expectations of 22 to 30 million bushels. Cumulative export shipments are 47.9% of the USDA forecast for the year, roughly 12% behind the 5 year average. Soybean exports are working with a time constraint. In roughly 2 months, the South American crop will hit the market and U.S. soybean exports will slow considerably. Unlike corn, soybeans will be lucky to make the current export forecast.

Some profitable soybean trades are still likely as futures move up and down based on South American weather, but be sure and complete your cash sales before China starts looking south for its soybeans. The cash market is already setting up to penalize deliveries in February and March. Deferred soybean contracts for March delivery are trading at a 4 cent discount in Illinois and 3 cents in Indiana. At the same time, March corn deliveries in Illinois and Indiana offer a 3 cent premium over the spot price; still not enough to cover the cost of storage.

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