Market Matters Blog
Mary Kennedy DTN Basis Analyst

Thursday 01/10/13

Soybean National Average Basis Unchanged

The accompanying chart shows the strongest (red line) and weakest (blue line) the national average soybean basis (DTN National Soybean Index - Chicago futures contract) has been over the last five marketing years along with the five-year average basis (purple line).

(DTN chart)

As the chart indicates, the national average soybean basis of 15 cents under the March futures (green line) is unchanged from last week and is still above the five-year average of the strongest basis at this time. The soybean basis was higher last week along the river in St. Louis and Ohio as barge freight has continued to drop and river terminals that need to move beans to the Gulf are trying to get their product moving ahead of the possible river closure. The prediction for the river to close between St. Louis and Cairo has been extended to the end of January, but barges are still stalled at Thebes for 16 hours a day due to the rock removal, which continues to slow grain movement down river.

In its weekly Grain Transportation Report (GTR), USDA reported "during the week ending January 5, barge grain movementstotaled 388,000 tons, 19% higher than the previous week but 23.8% lower than the same period last year. During the week ending January 5, 252 grain barges moved down river, up 26.6% from last week; 427 grain barges were unloaded in New Orleansdown 28.8% from the previous week."

Barge freight rates dropped again last week on low demand and very few bids in the market as shippers tried to get grain moving on concern that the Mississippi River could close due to low water levels. USDA reported in the weekly GTR that the rates in the Illinois corridor were down 127% or 16 cents per bushel from the prior report of January 1 and down 110% or 12 cents per bushel lower in the St. Louis corridor as the water levels are the lowest in these areas. As the water levels continue to slowly fall in those areas, barge traffic becomes more difficult to navigate and shippers are concerned the river could close by the end of January as predicted. However, the U.S. Army Corps of Engineers has stated they are confident they will be able to support the required 9-foot deep channel between St. Louis and that the rock removal at Thebes could create a 2-foot deeper channel at Thebes by the end of this week. Even still, the low water levels have created not only lost business for smaller barge lines, but also a loss of profits as barges have been restricted to less tonnage due to the required 8-foot draft instead of the normal 12-foot draft. Each inch of cargo lost relates to 17 tons of lost product, which basically means shippers are paying the same freight to ship less product.

"The uncertainty of this deteriorating situation for the nation's shippers is having as much of an impact as the lack of water itself," stated Michael Toohey, president and chief executive of the Waterways Council Inc., told the Associated Press. The Waterways Council and the American Waterways Operators group consider the situation dire, AP reported.

Posted at 1:34PM CST 01/10/13 by Mary Kennedy
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