Cash Grain: Looming Harvest Causes Basis Weakness

Grain futures were mostly higher over the past week of trading as yield indications from early harvests point to disappointing results. Although much of the country is still a few weeks away from ramping up for harvest, early harvest pressure is starting to appear especially in Southern states.

For corn, the U.S. average spot basis was fractionally lower, but losses were prominent in the Southern States and along river terminal areas. Barge rates continue to move higher in anticipation of an early harvest. For the week, barge rates were up 10 to 15 cents a bushel across river markets throughout the Midwest, pushing basis levels down in these regions. In the Plains and the Western Cornbelt, basis levels were mostly higher. However, the cash market in much of the West continues to be weaker than the norm with spot corn basis running at 20 to 30 cents lower than usual for this time of year.

 


For soybeans, the overall US average was up 2 cents, but there were substantial movement in certain parts of the country. Bean basis along the river system took a blow this week, but areas of the Western Cornbelt and Indiana/Ohio saw some solid gains. 10-cent gains by soy processors were common in Iowa and Nebraska as harvest there remains some time away.



Basis levels should be varied across the country depending on your location. Areas with harvest within a week or so should start to see basis levels widen sharply. Barge rate increases and ample supplies will keep basis levels weak for the near-term. Look for opportunities to forward contract for post-harvest delivery as markets should pay ample returns through a wider carry.