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Cash Grain Commentary by Cash Grain Bids Inc

Cash Prices Gain Ground

Corn and soybean basis declined by about 2 cents this week, with soybeans showing more weakness than corn. At the same time, corn and soybean futures gained 7 and 6 cents respectively, raising cash grain prices between 4 and 6 cents for most producers. The average corn price across the US is $1.95. The last time we saw $1.95 for corn was at the end of July, just before prices plummeted as the harvest was brought in. Soybean cash prices, on the other hand, topped out at the end of December and are now off their highs by 40 cents, averaging $5.43 across the nation.

On average, all four of the major grain merchandisers lowered corn basis across their facilities that we track. ADM was the most aggressive, dropping basis by 2.3 cents. Bunge, with most of its facilities in the South, appeared to have a more optimistic view of basis. They dropped their average corn basis less than half a cent across all of their elevators. Bunge was also the only company to raise its soybean basis this week, inching the average basis up half a cent. Consolidated Grain and Barge, which has heavy influence in Illinois, Indiana, and Ohio, dropped soybean basis nearly 9 cents on average.

Key Companies - Weekly Basis Change
Company	Corn	Soybeans
ADM	-2.3	-4.91
Bunge	-0.21	0.5
Cargill	-1.55	-3.59
CGB	-1.94	-8.83
Futures	6.5	5.5

While corn basis was mostly lower or unchanged, there were areas of strengthening basis in Minnesota, Wisconsin and Michigan. Ocean freight rates declined again this week making US corn prices around the Great lakes very attractive to overseas buyers. Basis also remained strong along the Eastern seaboard, where supplies are tight.

Soybean basis was much weaker than corn this week. Most of the Midwest saw basis drop anywhere from 2 to 4 cents. Producers along the river saw basis drop the most, as barge rates were up 7% this week. Higher barge rates and lower basis were both due in part to increased soybean sales. Many farmers are using the recent futures increases to make cash sales.

Soybean basis at the Gulf moved slightly higher this week. Higher barge rates slowed shipments to the Gulf, tightening supplies, while lower ocean freight rates out of the Gulf- down 18% this month- have kept basis above the 3 year average of roughly 40 cents.

As we move closer to the South American harvest, soybean basis should continue to decline. Dry weather in Argentina has lent strength to soybean futures, but with good yields predicted for Northern Brazil, the impact of the South American crop could bring prices down considerably. Remember that the we have seen record low South American yields for the last 2 years. If the South American crop can even get close to trend line yields, we will see production numbers rise more than 10% higher than last year.

Corn prices seem to have a number of factors running in their favor. Fund buying has pushed prices up and increasing demand from both the domestic ethanol market and the overseas market makes it appear likely that the USDA will increase their export forecast. High input costs may result in lower corn acres this coming year as well. While all of these things present a positive picture for corn, the overriding influence on this market is the currently large stock of corn. The stocks to use ratio is at 22.4% as of January. Even with increased exports, the US stocks to use ratio will remain at record highs. This may be the time to thank the fund buyers for supporting the market, and then sell some of your crop.