Market Matters Blog
Mary Kennedy DTN Basis Analyst

Wednesday 07/24/13

Soybean Basis, Cash Price Tumbles

Soybeans

(DTN chart)

National average soybean basis of 25 cents over August futures is 34 cents lower than last week, but is still higher than the DTN 5-year average strongest basis. Strong cash prices last week into Monday enticed farmer selling, which resulted in sharply lower basis levels in many areas of the Midwest, along with some basis rolling from August to September and/or November ahead of first notice day next week. Unconfirmed rumors of China releasing up to 3 million metric tons of soybeans from reserves surfaced Tuesday morning, pressuring futures. With another drop in basis and lower futures, the DTN average cash price was down 76 cents Tuesday afternoon and was 56 cents lower than one week ago. Average cash prices in the Midwest on Tuesday afternoon ranged from 64 cents per bushel lower to $1.02 cents lower. Tight supplies in the U.S. may get temporary relief from South America imports, but if late-planted soybeans cause a delay in the fall harvest, soybean stocks could become tighter than expected. USDA reported on Monday that 46% of the soybeans have flowered versus the 5-year average of 59% with Minnesota and Iowa well behind their 5-year average.

Corn

National average corn basis this week of $1.39 over September futures is up 1 cent from last week and is $1.17 higher than the DTN 5-year average strongest basis level. Corn basis levels were mixed the past few days with some Midwest ethanol plants weaker as ethanol futures began to follow corn lower and spot ethanol cash prices followed. With cash prices coming under pressure recently, the corn basis remains strong for now as tight old-crop supplies continues to be supportive. While recent rains in Iowa and Illinois were beneficial to the corn crop, USDA reported on Monday that corn conditions in Iowa declined 2 percentage points last week. Corn silking was behind at 43% versus the 5-year average of 56% with Minnesota corn at 19% versus the 5-year average of 46%, Iowa corn at 18% versus the 5-year average of 54% and Wisconsin corn at 18% versus the 5-year average of 33%. As corn nears its pollination phase, forecasted temperatures for the next week appear to be favorable during this key stage for the crop.

Hard Red Winter Wheat

National average HRW basis for this week at 17 cents under September futures is up 1 cent from last week and is 37 cents higher than the DTN 5-year average strongest basis. Mill demand has resurfaced as export and feed demand continue to compete for supplies. There have been various reports that feed wheat is moving into the southwest feed markets at a 45- to 60-cent per bushel discount to corn. Until we see an increase in corn supplies in that area, we will continue to see wheat in feed rations due to cheaper price and better availability. Brazil is expected to buy more U.S. and Canadian HRW wheat again due to tight stocks causing higher bread prices and near panic among the millers in the country. USWA said on Friday in their weekly harvest report that harvest is 99% complete in Texas, Oklahoma and Kansas and USDA reported that harvest in the key 18 states was 75% completed as of Sunday.

Posted at 1:08PM CDT 07/24/13 by Mary Kennedy
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