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Grain Market & Basis Trends Week of Oct 6, 2017

Crop Marketing

Grains were mixed this week with corn and wheat grinding lower while soybeans got a late week rally to post positive gains. On the week, corn was off 3, wheat off 14 and soybeans advanced 8 cents.

Soybeans are finding modest support as rains are expected to slow the US harvest. On Tuesday's poll (10/3) , many FBN℠ members reported that their soy harvest was delayed because of wet fields (see state by state harvest progress averages below).

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Precipitation is expected to pass back over the Midwest from Thursday through Saturday which should continue to slow harvest pace. The forecast clears up favoring harvest in the 6-10 and 11-16 day precipitation forecasts. Dry spring planting in Brazil is also supporting the market. Brazilian oilseeds industry group, Abiove, estimated the nation's soybean output at 108.5 million tonnes in the 2017/18 season, down from a record 113.8 million tonnes in the previous crop cycle. Longer term traders are considering the implications of a La Nina weather event which appears to be a more likely outcome in the next few months. This tends to be associated with dry weather in Argentina.

This week private analyst Informa inched higher their estimates for the corn and soy crop. Informa sees the US corn crop at 14.18 BB and a yield of 170.5. USDA has it pegged at 14.18 on production and 169.9 on yield. For soybeans, Informa also upped the production to 4.47 BB and a yield of 50.0. These are similar to USDA at 4.43 and a yield of 49.9.

Weekly export sales from USDA showed better than expected business for corn on the week while wheat and soybeans were at the high end of expectations. Year-to-date sales for corn and beans continue to significantly lag last year's pace with corn sales 40% lower than the sales achieved at this point last year while soybean sales are 18% lower. USDA for the year expects corn sales to be 20% lower while soybean sales are expected to be 4% higher.

USDA will have new supply and demand estimates in their official WASDE Report October 12 at 11 am CDT.


Grain basis had extreme bouts of volatility this week driven in part by a spurt in harvest progress as well as low river levels which sent barge freight shooting to 3-year highs. But by the end of the week the meteoric rise in barge costs reversed course giving way to basis levels to return to a more normal state. On the week, corn basis was unchanged while soybean basis was off 2 cents.


For corn, the upper Midwest and WCB regions continue to be slow to harvest which has given some limited life on basis and a few buyers occasionally popping quick-ship premiums. This week saw another ethanol plant in NW IA put a premium to their basis boosting it 7 cents a bushel. In Illinois & Indiana as well some corn plants there also found the need to push their basis higher by 10 cents. 

While these few isolated buyers bid up their basis, this was against a broader backdrop of weakness or steady basis for much of the remaining corn processors. In the southern Plains, basis levels have been holding firm as strong feed demand and a mediocre crop has made for some early season premiums existing in the marketplace for OK feed buyers. 


In the soybean market, crush plants were mostly under pressure this week with a loss of 4 cents a bushel as a group. However about 25% of the plants saw 5 to 15 cent losses on the week as there were virtually no quick-ship premiums to be found. For river terminals, after the dust settled from the barge freight gyrations on the week the average river basis was mostly unchanged. But this masks significant losses in areas on the lower MS River that ended the week with double-digit drops.


With big crops on the way to market and large carryout from the old-crop 2016 marketing year basis levels seem likely to face more pressure ahead. Crop storage space will be at a significant premium this year making on-farm storage an attractive marketing tool to capture better basis levels into late 2017 early 2018. The average carry from now until January across all grain buyers is 18 cents a bushel for corn and 22 cents a bushel for soybeans. 


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