US Cash Grain Prices Under Pressure Amid Record Yields and Shift in Market Dynamics

US cash grain prices for corn and soybeans have declined significantly over the past week, following a recent surge in the cash wheat market. Despite record yields, producers are facing pressure to market their crops, leading to increased domestic basis premiums and movement of corn. The government's estimate of 275 million bushel carryover for soybeans is likely to be revised downward, given China's continued purchases of US soybeans.

Key Takeaways:

• US domestic basis premiums for corn and soybeans have declined by an average of 1 cent per bushel and nearly 3 cents for soft red winter, respectively, since late last week.
• Country Hedging's Brian Liedl notes that the recent run in cash wheat prices has led to significant engagement by producers, who have plenty of crop left to market after reaping record yields.
• Corn harvest may be taking place faster than the USDA's weekly report indicates, with buyers finding a more adequate flow of corn on the cash market.
• Farm-gate soybean prices have increased by over 40 cents for the week, with Farm Futures analyst Bryce Knorr suggesting that the government's 275 million bushel carryover estimate for soybeans is likely to be reduced.
• China has booked nearly 15 million metric tons of US soybeans, just 4 million tons fewer than Beijing bought in 2008/09.
• Soybean futures skyrocketed, closing with cash-contract gains of nearly 17 cents, while cash corn and wheat futures also ended 1-3 cents higher.
• The national cash price indices maintained by the Minneapolis Grain Exchange stand at $9.70 3/4 for soybeans, reflecting an average basis of -58 3/4 cents relative to yesterday's settlement of January CBOT futures.
• The rain in the Corn Belt has slowed harvest this week, with logistical challenges for producers and suppliers.

Statistics:

• The decline in domestic basis premiums for corn and soybeans has averaged 1 cent per bushel and nearly 3 cents for soft red winter, respectively.
• China has booked nearly 15 million metric tons of US soybeans.
• Soybean futures closed with cash-contract gains of nearly 17 cents.
• The national cash price indices maintained by the Minneapolis Grain Exchange stand at $9.70 3/4 for soybeans, reflecting an average basis of -58 3/4 cents.

Sources:

• Dow Jones Commodities News via Comtex, "Domestic Basis Premiums for US Cash Grain Under Pressure", November 18, 2009
• Quote from Brian Liedl, Country Hedging, via Dow Jones Commodities News via Comtex
• Quote from Karl Setzer, Iowa commodity trade advisor, via Dow Jones Commodities News via Comtex
• Quote from Bryce Knorr, Farm Futures analyst, via Dow Jones Commodities News via Comtex
• Quote from Doane Agricultural Services, via Dow Jones Commodities News via Comtex
• Quote from Freese-Notis Weather, via Dow Jones Commodities News via Comtex