Market Matters Blog
Mary Kennedy DTN Basis Analyst

Thursday 12/27/12

Corn and Soybean Basis Steady, River Levels Struggling

The accompanying chart shows the strongest (red line) and weakest (blue line) the national average corn basis (DTN National Corn Index - 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 corn basis this week (green line) of 7 cents under the March futures is up almost 1 cent from last week and is higher than the 5-year average strongest basis level at this time. The corn basis has been steady as the cash price has fallen below the $7.00 mark, but there are reports that the cash market is trading more on offers than at the posted bids as end users need to replenish their supplies. Weakness in the cash corn price and the river basis was seen as lack of exports continues to pressure the market, thus fewer corn barges are moving to the Gulf. Even still, traffic on the river has slowed as the river levels between St. Louis and Cairo are still low even after some recent help from rain and snow in the Central Midwest.

(DTN Chart)

While less corn moved down river to the Gulf for export, the pace of soybean barges moving down river for export was steady. While the soybean basis was firm on the interior, the soybean basis was lower along the St. Louis-Illinois corridor where barge navigation on the river last week was almost at a standstill. The removal of the rock formations continued at Thebes, Ill., with only one barge allowed to pass at a time during an eight-hour timeframe which had created a backlog of vessels on the river. The USDA reported that during the week ending December 22, 282 grain barges moved down river, which was down 22% from last week. That equated to 440,432 tons of grain movement by barge which was 18.5% lower than the prior week and 41% lower than that same period one year ago.

In the weekly USDA Grain transportation report, the following headlines, as stated by the USDA, reflect some of the top stories of 2012 that pertain to issues affecting grain barge transportation on the river.

*Despite lower exports and difficult navigation conditions caused by the severe drought, Mississippi Gulf exports are expected to end the year only 4-5 percent lower than last year.

*Barge freight rates on the Mississippi River were at or below average during the first half of the year, but have since risen above average because of reduced barge drafts due to low water levels.

*As the year closes, the U.S. Army Corps of Engineers is conducting navigation improvements south of St. Louis, MO, to remove rock pinnacles that threaten to block navigation in the coming weeks.

Posted at 1:28PM CST 12/27/12 by Mary Kennedy
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