Market Matters Blog
Mary Kennedy DTN Basis Analyst

Wednesday 07/31/13

Hard Red Winter Wheat Basis Strong; Corn Basis Recovers

Hard Red Winter Wheat

(DTN chart)

National average HRW basis for this week at 15 cents under September futures is up 1 cent from last week and is 41 cents higher than the DTN 5-year average strongest basis. Demand has been steady from mills and the market expects Brazil to buy more U.S. wheat due to their tight old-crop supplies. The recent freeze in Parana, where almost 50% of Brazil's wheat is produced, has bakers nervous about covering needs and asking for an increase of imports. Feed demand has been steady, but lower corn prices may become a factor as to whether demand will continue. USDA reported Monday that the U.S. HRW wheat harvest is 81% complete with harvest in South Dakota at 21% done versus the 5-year average of 60% and Nebraska at 75% done versus the 5-year average of 89%. Early reports out of South Dakota were showing varying yields and lower test weights. U.S. Wheat Associates reported Friday that the SRW wheat harvest was nearly over and from the samples tested last week, quality had dropped as sprout damage from rain during harvest plagued the new crop still in the field. Last week's Ontario weekly crop report and this week's Manitoba crop report stated vomitoxin is affecting some of the new-crop winter wheat. High levels of vomitoxin can be toxic to animals and can also affect the baking quality of the wheat.

Corn

National average corn basis this week of 84 cents over September futures recovered 4 cents of the 57-cent loss of late last week and is 24 cents higher than the DTN 5-year average strongest basis level. Recovery began early this week as nearby corn supplies have become hard for end-users to source since the drastic price drop last week. Corn basis levels took a sudden drop late last week as weather forecasts for corn pollination were very favorable. Corn was also feeling pressure from prior farmer selling and lower soybean prices with the average corn cash price ending last week down $1.09 from one week ago Friday. The basis at the Gulf dropped sharply last week as well as corn movement for export has slowed. Last week's total grain movement down river was 43.5% lower from the previous week per the USDA weekly GTR report.

Soybeans

National average soybean basis moved from August to November futures last Friday, showing a loss of nearly $1.00 basis the August futures. This week's basis is 82 cents over November futures, but prior to the move from August to November last Friday, it was under the 5-year average basis at that time. Recent farmer selling on improved weather conditions sent the basis and November futures into a free-fall last week. Soybean basis levels were sharply lower nearly every day last week and the average cash price Friday was down $2.43 from the end of the prior week. There has been a slight recovery in the basis, but soybean cash prices continue to drop this week as weather forecasts continue to look favorable for the next few weeks.

Posted at 12:00PM CDT 07/31/13 by Mary Kennedy
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