Corn basis was mostly unchanged or higher this week throughout the corn belt. The only weakness in basis was along the Mississippi River. With barge rates up roughly 8% on average in the past week, merchandisers widened basis to recover some of their costs. Away from the river basis was unchanged or up a penny or two. The Eastern Seaboard saw larger basis gains with parts of Pennsylvania picking up more than 5 cents. This week declining futures and farmer planting were the key drivers of basis. As of Monday corn planting reached 70%, that is 5% below last year but 6% higher than the five year average.

Strong corn exports also lent strength to basis. Corn export inspections came in at 37.5 million bushels, roughly 3 million bushels higher than the previous week. May's supply and demand report is scheduled for the 12th. An increase in ethanol use is expected for old crop corn, but ending stocks will still remain high with an ending stocks to use ration just under 21%. This will be the fist official supply and demand report for new crop corn, so traders will be monitoring the report closely for signals of where corn will be heading in the coming months.

Soybean basis widened for most states west of the Mississippi. East of the Mississippi basis was unchanged or higher by a penny or two. The only significant strength in soybean basis occurred in Eastern Ohio and Pennsylvania where basis improved by 2 to 5 cents. Soybean basis weakened this week as futures rallied. Fund buyers drove prices up sharply as they moved into soybeans after a rally in metals and oil. Cash traders were less confident in the price rally and lowered basis at many locations. Monday, of course, saw a reversal and nearby soybean futures fell 7 cents. If traders focus on the fundamentals and soybean prices turn bearish again we may see basis pick up again.

Soybean planting moved ahead by 8% this week reaching 18%. That is 1% below the 5 year average and 6% behind last year. With December soybeans moving above $6.25 this week and corn planting moving ahead strongly it seems doubtful that there will be any dramatic switch away from the USDA's March planting intention report, which signaled considerably higher soybean acreage. New-Crop soybeans will be hampered by high stocks and large acreage. If planting conditions go well and we see high yields this year we could be looking at another year of below average basis.

Expect basis to continue to move at this sluggish pace for the next several weeks. Weather, be it good or bad, may begin to make basis move more aggressively once we move into July. For now basis will continue to move opposite of futures, and any gains will be hard fought and probably won't cover the cost of storage.

sales@cashgrainbids.com
©2006 CashGrainBids.com, Cash Grain Bids Inc. | All Rights Reserved.