The 2018 marketing years for spring-planted crops ended over the Labor Day weekend, and what a year it was. A selling season that began with trade wars and natural disasters ended with even more turbulence.
A flood of deliveries on first notice day for September futures on Friday sent spreads sharply lower. Nearbys plunged as farmers with grain in commercial storage had to sell or pay additional charges. But not all the news in the cash market was bad, with significantly lower production in some parts of the country causing cash markets to trade with much stronger than normal premiums to futures.
Nationwide the basis outlook headed into fall looks promising for growers. Using USDA forecasts for corn and soybean production, plenty of storage should be available for 2019 crops, at least on average. Only 95% of the nation’s total space may be filled, and the actual amount could be less. Production could be lower, for one, and late harvest in many areas will eat away at old crop supplies left over from 2018 before combines start rolling.
Still, that relatively optimistic assessment wasn’t enough to avoid stark contrasts in basis last week. Corn was a prime example.
Disappointing shipments led to below average basis in the export pipeline, though the market from the Gulf up river did strengthen a little last week. With the Illinois River below option grain was registered for delivery Thursday, just in time to be put out on first notice day. September-December widened out nearly four cents from where it traded last week.
But basis away from the river in areas affected by bad weather traded much stronger than normal, improving again last week. Toledo was 38 over as buyers eye much lower than normal production that could leave 28% of the state’s storage capacity empty. And, with the Carolina hog and poultry belt suffering from drought, the Southeast should begin importing corn from the Midwest sooner than usual.
That same positive basis was seen in parts of the western Corn Belt where cash is normally weaker than futures due to its distance from the delivery market. But after devastating floods from the “bomb cyclone,” production in parts of Missouri, Nebraska, Iowa and South Dakota will be lower than normal. Omaha basis continued above average into the end of the marketing year, jumping a dime last week to trade 10 over. Many areas of South Dakota are also at or near option. Cash also strengthened last week in some western feed lot areas expected to be short on corn.
Ethanol plants suffering from weak margins due to low prices for the biofuel were hit hard by rising corn feedstock costs this summer. But a firmer tone to the ethanol market last week helped those still running boost basis a little to attract corn from farmers resisting to sell at summer lows.
Fairly heavy deliveries were seen Friday and again today in soybeans, mostly in Chicago, which wasn’t a surprise with more supplies registered and cash 30 below the board. But despite the weaker bids in the export pipeline last week, overall basis was firm, though it remains well below normal due to burdensome supplies and the impact of the trade war with China.
Stronger bids were noted in the Dakotas, where prevent plant claims were high. And some, though not all, processors pushed a little.
Soybean spreads didn’t change much compared to corn or wheat, even strengthening a little at the end of the week. Wheat endured bearish surprises from first notice day. Winter wheat supplies were rushed into position where little or none were registered, with deliveries of hard red winter wheat in Hutchinson, Kansas and East St. Louis, though no SRW was put out. September-December SRW weakened 8.25 cents Friday alone, while HRW widened out a nickel and at 19 cents offered hedging opportunities for growers with storage.
HRW basis eased last week with weaker bids noted out of the Texas Gulf. But SRW actually strengthened in the export pipeline. Stronger basis was also seen for spring wheat despite deliveries against Minneapolis September thanks to a slow harvest holding down near-term supplies.
Lower than normal protein in hard red winter wheat may also be boosting bids for spring wheat. But sorghum basis slid on the prospect of more competition in feedlots, despite a better tone in export channels.
The interactive maps below show how basis fared around the country. Click the box in the upper left-hand corner of the map to bring up the legend, and to turn features show on or off.
Download a complete version of the outlook with extensive charts and analysis using the Download button at the end of this report.
Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Advisor. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.
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