Market Matters Blog
Mary Kennedy DTN Basis Analyst

Thursday 07/18/13

Corn, Wheat Barge Movements Increase; Corn Basis Continues To Rise

National average corn basis this week of $1.31 over September futures is up 4 cents from last week and is $1.14 higher than the DTN 5-year average strongest basis level. Strength in basis levels increased at ethanol plants throughout last week as margins improved and plants looked to secure nearby corn stocks. Adding to the strength were ethanol futures which moved higher than corn, especially early this week. Ethanol stocks may continue to shrink with supplies expected to drop in the next few weeks when some plants head into planned maintenance time for cleaning which will slow production. The market remains concerned that ethanol supply may not meet demand for the current summer peak driving season. A concern that the corn crop is behind schedule developmentally was seen in the weekly USDA Crop Progress report showing only 16% of the corn is silking as of July 7 versus the 5-year average of 35% and 67% at this time last year. Illinois, Minnesota, and Iowa are some of the key states that are behind for this time of the year. Basis levels along the river have been mixed, but inspections last Monday showed more corn inspected for the week than what the trade had expected. USDA's Grain Transportation Report showed for the week ended July 11, inspections of corn for export were up 98% from the prior week but 28% below last year at this time.

(DTN Chart)

USDA reported that barge business on most of the river system is back to normal after high water in early July brought traffic to a standstill in the Upper Mississippi River. The Ohio and Tennessee rivers reported minor flooding in spots last week, but nothing severe enough to stall traffic. Improved river conditions were apparent in barge movement last week with 610,450 tons moving down river for the week ended July 13, which was 62.3% higher than the prior week. A total of 398 grain barges moved down river, which was 63% higher than the prior week with 430 barges unloading in NOLA (New Orleans, La.), 49.8% higher than the previous week.

The increase in barges was not only due to better conditions on the river, but a significant increase in wheat barge movements for the week ended July 13 boosted shipments. The total of wheat moving down river was 197,000 tons, which was up almost 400% from the 5-year average. For the past four weeks wheat movements are up 162% for this time of the year. The rise in wheat shipments to the Gulf have been boosted by more SRW demand from China with more to come as 16% of their crop has been deemed unfit for human consumption. The USDA Grain Transportation Report showed since the new marketing year began June 1, SRW wheat export sales have been almost four times higher than the same time last year. We may also see an improvement of HRW wheat shipments to the Gulf for the rest of the summer as reports of Brazil looking for more wheat surfaced late Wednesday. Brazil wheat stocks have fallen so low that last week the government invoked the country's Supply Law, basically an anti-hoarding law, which states that any company holding wheat stocks must offer some of that supply to their domestic market. Their last purchase for 2 million tons of U.S. HRW was due to be shipped to the county by the end of this month.

Posted at 1:13PM CDT 07/18/13 by Mary Kennedy
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