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Commodity futures

Corn and Soybean Basis Rally Amid Record Rains and Shifting Exports

Strategic Insights

— 2 min read

Record rains in Texas, coupled with unflagging domestic demand, have led to an almost unprecedented basis rally in the United States. Soybean basis values have risen to as high as $1.60 a bushel in Illinois, with processors paying premiums of $1.20 to $1.40 a bushel in the Midwest. This rally has resulted from record exports to China in 2003, followed by a disappointing domestic soybean harvest. Conversely, CBOT soybean futures have fallen to four-month lows due to improving new-crop prospects and faltering exports.

Key Takeaways:

  • Basis values for soybeans have increased significantly, with some processors paying up to $1.60 a bushel in Illinois.
  • Record exports to China in 2003 and unflagging domestic demand have led to the basis rally.
  • CBOT soybean futures have fallen to four-month lows due to improving new-crop prospects and faltering exports.
  • Terminals are now offering soybean basis in excess of $1 a bushel, with most processor-dominated markets in the Midwest posting premiums of $1.20 to $1.40.
  • Corn basis has also risen, with some markets offering double-digit premiums, as the CBOT plummets due to an unexpected large old-crop corn stocks and new-crop corn plantings.
  • The USDA reported surprisingly large old-crop corn stocks, contributing to the decline in CBOT corn futures.
  • Spring wheat basis rose by an average of 4 1/2 cents, countering flat-price pressure produced by the drop in hard red spring wheat futures.
  • Interior winter wheat basis widened out by an average of 3/4 cent, likely in response to seasonal harvest pressure.
  • CBOT grain futures were uneven overnight, with a weaker undertone in corn and oats, countering gains of up to 11 3/4 cents in soybean futures.
  • Support for soybean prices stemmed from smaller government seeding estimates, strong soybean basis, and an on-going expansion in the U.S. poultry flock.

Statistics:

  • Basis values for soybeans have increased to as high as $1.60 a bushel in Illinois.
  • Terminals are now offering soybean basis in excess of $1 a bushel, with most processor-dominated markets in the Midwest posting premiums of $1.20 to $1.40 a bushel.
  • CBOT soybean futures have fallen to four-month lows, largely due to improving new-crop prospects and faltering exports.
  • The USDA reported surprisingly large old-crop corn stocks, with new-crop corn plantings also contributing to the decline in CBOT corn futures.
  • Corn basis has risen, with some markets offering double-digit premiums, as the CBOT plummets due to the unexpected large old-crop corn stocks and new-crop corn plantings.
  • Spring wheat basis rose by an average of 4 1/2 cents, countering flat-price pressure produced by the drop in hard red spring wheat futures.
  • Interior winter wheat basis widened out by an average of 3/4 cent, likely in response to seasonal harvest pressure.
  • CBOT grain futures were uneven overnight, with a weaker undertone in corn and oats, countering gains of up to 11 3/4 cents in soybean futures.

Sources:

  • ODJ via COMTEX
  • OsterDowJones
  • CBOT (Chicago Board of Trade)
  • USDA (United States Department of Agriculture)
  • National cash grain indexes maintained by the Minneapolis Grain Exchange
  • Gary Wulf, OsterDowJones
  • Global Weather Services (GWS)

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