January 20, 2013 | Grain Hedge Insights | Jackie Roembke | Views: 208

Basis Levels Stagnant on Futures Rally

U.S. average soybean basis levels unchanged on the week as futures prices climbed following the January WASDE, and Grain Stocks report.

Both corn and soybean basis levels saw limited movement this week, as futures markets climbed on renewed concerns about short supplies. For the week, U.S. average corn and soybean basis were unchanged.

In the corn market, higher than expected feed use reported in last week’s USDA report cut the old-crop ending stocks forecast below trade estimates. But, continued lack of business in the export market and ethanol sector has kept basis levels stable to weaker. For the week, ethanol plants lowered their basis by 1-cent a bushel. On Wednesday, EIA showed ethanol production took a hit for the week as production averaged 784,000 bushels per day, the lowest level since the agency started releasing weekly data in June 2010. Grain Hedge still expects final corn use for ethanol to fall short of USDA’s current target of 4,500 MB as weak margins for ethanol producers should limit production.

For the soybean market, Gulf basis levels were off 9 cents a bushel which pushed river terminals down by 3 cents a bushel. Export sales continue to be on a torrid pace as this week’s total of 1.6 MMT was a marketing year high thanks to aggressive Chinese purchases. Domestically, soybean crushing margins have started to weaken but still remain exceptionally high compared to historical norms. For the week, soybean plants increased basis by nearly one-cent a bushel.

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