Market Matters Blog
Mary Kennedy DTN Basis Analyst

Friday 01/04/13

Soybean Basis Higher Than Last Week

The accompanying chart (visible on DTN online products) shows the strongest (red line) and weakest (blue line) the national average soybean basis (DTN National Soybean Index minus 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 17 cents under the March futures (green line) is 2 cents higher than last week, and is still above the five-year average of the strongest basis at this time. The basis along the river was stronger last week as terminals pushed to move barges during the last week of December as water levels kept dropping faster than predicted. The U.S. Army Corps of Engineers recently released water for the second time from Carlyle Lake on the Kaskaskia River near St. Louis to try and help water levels in the St. Louis-Cairo corridor. It is uncertain as to whether this second effort can increase the water levels enough to avoid a complete closure. Current predictions are that the water levels are at dangerously low levels and that the river may close by the end of next week.

(DTN chart)

Barge movement still remained slow going due to lower water levels, the stoppage during the day at Thebes because of the rock removal and lower drafts required due to low water. The USDA reported in the January 3, 2013 Grain Transportation Report that: "During the week ending December 29, barge grain movements totaled 325,625 tons, 26% lower than the previous week and 28% lower than the same period last year. During the week ending December 29, 199 grain barges moved down river, down 29.4% from last week; 600 grain barges were unloaded in New Orleans down 14% from the previous week."

Barge freight was 35% to 63% lower than the prior week, but it had little impact on soybean basis levels. Barge movement down river has been controlled by the lower water levels at St. Louis through Cairo as barges are restricted to 8' drafts. Also slower traffic has been a problem near Thebes, Ill., due to the rock removal which has closed the river part of day, only allowing barge passage during an 8 hour time frame. The Corps did cease the work during the week between Christmas and New Years, which kept the river from being closed down for 16 hours a day.

The most recent prediction for the water levels to drop low enough to cause a river closure is by the end of next week. Should the river actually close and barge traffic ceases, the soybean and corn basis levels will be affected because transportation costs will increase dramatically and shippers may have to turn to rail. While transporting grain by rail is the main method of transportation for elevators without river access, it may be difficult to obtain railcars for immediate use. Also, the cost may be well above the normal tariff rate due to the secondary freight market where cars can be "bought" for usage during a certain time frame if they are available.

Posted at 9:42AM CST 01/04/13 by Mary Kennedy
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