Market Matters Blog
Mary Kennedy DTN Basis Analyst

Thursday 12/20/12

Soybean Basis Continues To Rise as Barge Freight Goes Lower

This accompanying chart shows the strongest (red line) and weakest (blue line) the national average soybean basis (DTN National Soybean Index subtract Chicago futures contract) has been over the last five marketing years, along with the five-year average basis (purple line). As the chart indicates, the national average soybean basis of 25 cents under the January futures (green line) is up almost 2 cents from last week and is still above the five-year average of the strongest basis at this time as the soybean basis has remained firm in the interior. Along the Mississippi River, basis levels were mixed as barge freight was lower at the end of last week. Movement on the river was slow last week due to ongoing repair issues at Lock 27 and beyond, where rock formations are hampering barge traffic.

(DTN Chart)

Barge traffic will be slowed near Thebes, Ill., over the next month as the Army Corps of Engineers removes the rock formations protruding from the shallow river. While the river will not shut down to barge traffic during that time, there will be no barges allowed up or down river between 6 a.m. and 10 p.m. The waiting barges will be allowed to pass after the work hours with only 1 barge allowed to pass through at a time. The Corps also began to release water into the Mississippi on Saturday, December 15, from Carlyle Lake which is located on the Kaskaskia River system in southwest Illinois. The intent of doing so is that the additional water would add 6 inches of depth to the drought-stricken Mississippi by Christmas Eve, which could help barges pass through the dangerous rock formations in the river near Thebes with more ease until the work is completed in January.

In the weekly USDA Grain Transportation Report on December 20, USDA reported that barge freight between the lower Illinois River down to the southern corridor was unchanged to 85% lower with the Memphis through Cairo stretch dropping the most. While lower barge freight does help basis levels to improve, the strength in soybean and even corn basis last week was mainly due to the fact that shippers began to move grain again to the Gulf. After slowing and even stopping barge movement the prior week due to fears of a river closure at St. Louis in mid-December, water levels saw a small improvement after rains in the Ohio corridor supplied some moisture. Still, barge movement on the river was lower last week with the USDA reporting that during the week which ended December 15, 361 grain barges moved down river, which was down 30% from the prior week. This equates to 540,120 tons of grain which is 33% lower than the previous week and nearly 38% lower than the same period last year. While soybean shipments have increased due to strong export business at the Gulf, the corn exports are currently lower than last year at this time. Another reason for the lower YTD grain movement total could be that barge drafts have been restricted(less grain can go into a barge) since late July and are still currently in effect.

Posted at 2:43PM CST 12/20/12 by Mary Kennedy
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