After Harvest Lows Soybean Basis Rebound Remains Lackluster
Soybean basis improved in the northwest following the end of harvest, but the eastern states continue to experience depressed basis due to double crop bean harvest.
The basis lows were printed in the last week of September for both corn and soybeans on average throughout the nation. In just the last week, the national average basis for soybeans improved nearly a cent while corn basis continued climbing, up another 1 1/3 cents on the week. Despite the steady basis improvements observed since the harvest low, soybeans has not experienced the violent snapback in basis that it enjoyed during the same period last year. In 2011 the national soybean basis average improved 14 cents in the two weeks following the harvest low. This year, soybeans have improved a lackluster 3 ½ cents during the same period.
Across the United States
The slow basis improvement seen in soybeans this year could be caused by a number of abnormal events. First, going into harvest we had exceptional backwardation in the futures market. At one point there was almost a two dollar discount for soybeans delivered in July 2013 compared to soybeans delivered this November 2012. This sort of futures market structure gives farmers incentive to sell beans directly off the combine, and probably played a role in amplifying bean sales during this year’s harvest. However, since the height of the backwardation the cash market has adjusted and now provides, on average, a 7 cent carry from spot to Nov, a 5 1/3 cent carry from Nov to Dec and a 2 cent carry from Dec to Jan. The current cash structure should help support further spot basis improvement. Secondly, there is a chance that the soybean basis recovery has been muted as a result of improving yield expectations during this year’s harvest. Recently, we have seen multiple private analysts increase their soybean yield forecasts, and on October 11th we saw confirmation when the USDA raised their official soybean yield forecast from 35.3 to 37.8 bushels per acre.
Soybean basis seemed mixed across the different facility types last week with soybean plants improving their basis by 1 ½ cents, while basis along the river dropped 2 1/8th cents. The gulf remained unchanged.
The increase we observed in corn basis was supported by a one cent increase out of both ethanol plants and the gulf. Despite the slight improvement in corn basis out of the gulf, river terminals remained unchanged as a result of slightly stronger barge rates. Since harvest lows corn has increased 3 ¾ cents, on par with the rate of improvement we observed last year during the same time period.
We see spot soybean basis improving this week with the peak of harvest well behind us. North Dakota, South Dakota and Minnesota have been over 90% complete for more than a week giving reason for merchandisers to bump up the bid to start attracting more grain. The Dakotas were about 10% ahead of last year’s pace for the week of October 14th. We see weaker basis in the eastern part of the US, caused by double crop harvest pressure. Kentucky's harvested beans went from 34% to 42% last week, Missouri from 20% to 36%, and Tennessee from 24% to 33%. Harvest in these eastern states is moving along at an average pace and should continue to see basis pressure through next week.
Harvest Low Short-Lived in Cash Grain Market
Basis on the rise as harvest wraps up in key producing areas
If you blinked, you likely missed it this year. The usual drop in basis levels seen around harvest has been mostly non-existent this year, except for a few parts of the country with better supply prospects. Since September 1, corn basis has fallen only 5 cents while beans posted a more typical 20-cent loss. This year’s exceptionally tight stocks and production prospects continue to prop up basis levels for much of the country.
For the week ending October 11, corn and soybean basis levels were up 2 cents a bushel on average across the country. Continued declines in barge rates coupled with harvest wrapping up in key grain producing areas is help giving a lift to basis through much of the Midwest.
In the corn market, river terminals were driven higher thanks to a 5 to 10-cent a bushel drop in barge rates in the past week. However, the prospect of strong export demand stimulus this year seems unlikely as export sales continue to be lackluster. For the week, Gulf export basis bids were unchanged. Domestically, U.S. ethanol producers were up 2 cents on basis which was on par for the U.S average gains. Areas of weakness were noted in the Northern Plains and Upper Midwest where production has been more favorable.
For the soybean market, basis levels were substantially higher along the river this week thanks to sliding barge costs, but Gulf basis was 1 cent lower. Weakness was hitting the Carolinas and Mid-Atlantic as double-crop beans start to be harvested in full force.
Basis levels should continue to firm as we finish up the short harvest this year. But, the prospect of sharp rallies in basis seems dim. Already lofty basis levels, especially in corn, combined with slow export business should keep basis levels tied to domestic users like ethanol and feeders, where profitability is already being squeezed.
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Grain Barge Rates Sink, Lends Support to Grain Basis
River terminals to become more competitive
An early grain harvest this year has meant an earlier peak in barge rates. Over the past few days barge rates have begun to fall suggesting that the trend may be set for barge rates to continue the post-harvest harvest seasonal slide. Although average corn and soybean basis this week was up only modestly, areas around the River system posted solid gains thanks to 5 to 10 cent a bushel declines in barge rates.
For corn, basis levels were mostly unchanged through the heart of the Cornbelt, but Eastern areas saw more weakness as harvest hits full swing. Areas along the River system saw higher basis with average corn basis at river terminals jumping 4 cents for the week even though the Gulf basis was off 1 cent. At ethanol plants, basis levels were up 1 cent on average across the country with large gains noted at key plants in the Western Cornbelt.
In the soybean market, basis levels on average were modestly higher but showed more weakness in the Eastern Cornbelt with losses of 5 to 10 cents fairly common. However, strength out of the Gulf and lower barge rates helped lift interior river terminal basis by 5 cents for the week while soy crushing facilities were mostly unchanged for the week.
With harvest now surpassing the half way point, it will be interesting to see if basis levels will start to climb higher. The short-crop this year has definitely limited the usual pressure on basis and kept spot bids fairly strong through the harvest season. Adding to the upside potential for basis will be the likely erosion in barge rates over the next few months. Forward barge rates are 15 to 20 cents lower than current barge rates -- which means river terminals should start to be more competitive in the market place in coming weeks.
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Has Your CEO Seen the ROI of the VOIP?
Voice over internet phone systems can work for your ag business
Ten years ago I switch our home phone service that Qwest provided to a VOIP service, which stands for “Voice Over Internet Protocol.” The VOIP service works the same as the old-fashion phone except it used high speed internet to carry the conversations vs. the traditional phone line. Five years ago I was so pleased with how the home phone VOIP service was working that I subscribed to the service in our offices. This new technology costs a fraction of what traditional phone services cost and comes with many amazing options to help you’re ag business communicate with clients and employees.
One of my favorite features are Answering ruleswhich route calls based on the time called, caller ID or the number called. Imagine having a system that routed calls based on the caller ID, let’s say your company has a grain broker that you communicate with often and when he calls, the system automatically routes his call to your desk and cellphone at the same time, this potentially saves your broker, the secretary and yourself time and money. How about that important farm client that you want routed directly to you; they would really be impressed?
Another feature that is very useful is the “find-me” tool. Let’s say you have an office phone, cell phone, shop phone & home phone and you don’t want to make your clients call all your phones. Your client simply calls one phone and based on your phone settings will call each phone separately in the order you wish.
One last feature I will mention is the ability to setup custom extensions and recorded messages. Imagine setting up an extension called “daily grain bids”, when the client goes to that extension they are played a recording of the closing cash bids and then given a choice to press the #1 to speak to a grain merchandiser, once again another happy client.
I subscribe to Ringcentral.com and pay around $40 monthly, this includes unlimited long distance, an 800 number and all the wonderful features of the system. There are many other service providers to choose from such as 8x8.com, nextiva.com and getjive.com.
Volatility Creeps into Cash Grain as Market Bridges Old & New Supplies
Cash basis continued to trend lower.
Grain harvest continued its quick progression this week, but some areas of the country saw unusually strong upside basis moves. Overall, however, the US average corn basis was mostly unchanged while soybeans were off 1 cent over the past week.
Impressive gains at some key end users were noted for corn this week in NE, IA & IL, but overall ethanol plants as a group were off -0.7 cents for the week. River terminals were mostly higher propelled by strength out of the Gulf and a modest decline in barge rates on the Southern Mississippi River region, although more northern areas of the Mississippi and Ohio saw stronger barge rates and weakening basis.
In the bean market, basis levels continued to fall overall but pockets of strength and weakness were apparent this week. In the Upper Midwest and Eastern Cornbelt, basis levels saw losses of 5 or more cents but areas along the river were mostly unchanged thanks to a 6 cent gain out of the Gulf. Soybean processing plants, however, were weaker with a 3 cent loss on average for the week.
Reports from the cash market indicate farmer selling has been limited by the recent drop in futures. As a result, producer deliveries have mostly been filling existing contracts and not much spot-only delivery. While this has lead to basis strength in some areas around end users, some feedlots in the Plains are reporting they have all their feed needs priced for the next six months which may be signs of demand destruction. Further, export business has been anemic of late, with the latest weekly sales figures showing a dismal 400 MT of corn sold, when normally we are selling 400,000 to 1 million MT a week.
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Industry Invests in its Future
Auburn feed mill stands as proof
During my two-hour drive from Birmingham and Auburn to write this issue's cover story, "Auburn's New Feed Mill Comes to Roost," I tried to mentally prepare my questions for Dr. Don Conner, the head of the university's poultry science department, and Mitchell Pate, director of the poultry research unit, but my mind began to wander. I began to think about how excited the student's must be to kick off the Fall 2012 semester in an immaculate, brand-new, state-of-the-art feed mill. The purchase of school supplies was enough to get me motivated for the new school year, but imagine the message this new facility sends to these students: "The poultry industry needs you and this faciltiy represents its investment in you."
In this month's Manager's Notebook (pg. 36), "How to Recruit Tomorrow's Managers," Drs. Jay Akridge and John Foltz cite that by 2015 there will be 54,400 jobs annually for individuals in the agricultural sciences. (USDA report)
In a time when the majority of graduates in many disciplines are simply hoping to find anything in their chosen field, the kids in Auburn's gradate and undergraduate program know they are in high demand in the Southeast with the erection of the Poultry & Animal Nutrition Center. To date, the department has raised 40% of the cost of the mill with industry and stakeholder donations; it hopes to raise the addition 60% over the next four years. Within the modular feed mill, the industry's suppliers alone donated $750,000-worth of equipment. Impressive numbers by anyone's estimation.
According to Dr. Conner, the demand for skilled employees in the Southeast is high — and rising. Behind Georgia and Arkansas, Alabama ranks third in poultry production; Auburn University is located in the heart of the "Broiler Belt." The thing is, the demand Auburn seeks to meet it's just about "growing the industry's future CEOs and VPs," as it was explained to me, "at the end of the day, it's all about education," the university hope to utilize the mill for continuing education and training programs for individuals already working in the field.
In addition, the university's world-class research laboratories can provide endless opportunities for proprietary poultry-related research to aid in the stregthening the yields of poultry producers at all levels. Dr. Conner and his department urge anyone interested in feed mill stop in for a tour, stressing this isn't Auburn's feed mill, it belongs to the collective industry as they plan for a profitable future.
Cash Grain Update—Sept. 14
Storage for both corn and soybeans looks unfavorable
Spot corn and soybean basis has made slight gains so far this month. Spot corn moved up half a cent while spot soybeans increased a penny. The Gulf has done little to support both markets as corn basis gained one cent and soybean basis actually lost four cents. Barge rates also hampered the cash market as prices along the Illinois and Ohio Rivers have gone up couple cents in the last nine days. Rates on the Ohio River are currently sitting four cents above their five year average.
Taking a look at the carry in the cash market, storage for both corn and soybeans looks unfavorable. The average cash forward contract carry in the corn and soybean markets is 9 cents per bushel for five months of storage.
This compares to a nearly 22 cent carry in the corn market recorded at this time during the last two
years. The soybean cash forward carry is looking similar to the situation in 2010 when the carry was 10 cents storing until July. Last year the soybean market provided a 25 cent carry with five months of storage.
Feed & Grain Expands Newsletter
Introducing Monday edition to provide a
If you’re one of the nearly 9,000 people who receive Feed & Grain’s Industry Watch E-newsletter, thank you for taking the time each week to open and read our offering. Our staff closely follows news on the critical issues that impact the feed and grain industry, and we’re dedicated to sharing it with you in an easy-to-read format.
For the past two years, we’ve been mailing Industry Watch each Tuesday and Thursday, and we can see that many of you regularly click on the stories that matter most to you. Our newsletter stories, covering topics from the 2012 drought, Hurricane Isaac, Renewable Fuel Standard repeal, the Farm Bill and the presidential election, have become some of the most popular items on our web site this summer.
Between the success of Industry Watch and the results of a recent reader survey, the message is loud and clear: News is very important to you! So, starting Monday Sept. 17, Feed & Grain will be adding a third installment to our Industry Watch schedule.
Think of our Monday e-newsletter as the feed and grain industry’s “Weekend Update” — sadly without the hilarity of Saturday Night Live's Amy Poehler’s or Seth Meyers’ delivery — featuring top headlines from Friday through Sunday, because we know that weather, political campaigning and even legislation doesn’t stop over the weekend. You don’t have to do anything to receive the third mailing — everyone who currently receives Industry Watch will receive the new Monday edition.
And breaking news isn’t the only reason to check out Industry Watch. Our format includes a Web Exclusive section with blog postings, videos, infographics and articles selected for online delivery only (you won’t find these in print!) as well as Supplier Briefs, covering the latest news from equipment manufacturers, distributors and service providers. It also provides access to some of Feed & Grain’s staple offerings, such as a digital edition of our current issue and links to all of our Online Buyer’s Guide categories.
So again, thank you for your loyalty to Feed & Grain’s Industry Watch, and let us know what else we can do to improve it. And if you don’t already subscribe, simply register to start staying connected to the industry through our e-newsletter. If there are any topics, issues or trends you want to see us cover more — email me and let me know!
Web Meetings: Work Smarter Not Harder
Utilization of online web meeting tools can be a great edition to your workday and business.
- Meeting with John Doe in Waterloo to go over grain contracts
- Meeting with Bob Doe in Valley to go over 2012 grain programs
- Board meeting in Main Office to discuss new storage facility
- All company safety meeting at Duncan location
- Present 2013 Budget to General Manager in Main Office
Does this type of schedule look familiar to you? It’s hard to get much done in a day when you are running all over the country. Today, you can become more efficient if you utilize the new communication technologies that provide web meeting services.
A Web meeting will work great to conduct your meeting with John Doe, discuss his existing grain contracts by sharing the screen on your computer with him or let him take control and share his screen with you. If you really want to add the personal touch you can even activate the camera on your computer and show your face.
What is needed to do a web meeting?
- Web meeting service provider
- Computer for all participants
- High Speed Internet for all participants (84% of farmers have high speed internet)
To start all you need to do is log into your account; in this case I’m using www.gomeeting.com,
Then click on host a meeting and a screen will be presented to enter the meeting information. A meeting email is then automatically formatted for you to send to the recipients.
The recipient then clicks on the link in the email at the scheduled meeting time and everything begins to appear on their screen in a few short minutes.
The monthly service fee starts at around $50 per month for unlimited meetings. This fee can easily be justified by eliminating one or two drives to a meeting. The monthly subscription is only charged to the business hosting the meeting; guests do not pay any fees to utilize the service.
I believe this is a must have service for today’s agribusinesses.
A few web meeting service providers are:
Organize Your Online Life
EVERNOTE is a software application making its way to the top of the digital organization industry.
Today agricultural professionals spend more time than ever before on the computer reading email, searching the internet, working with software applications and entertaining themselves. Keeping your digital life organized continues to be a challenge with emails you want to keep, web pages you want to save and documents that need filed.
EVERNOTE is a software application that has made its way to the top of the digital organization industry. EVERNOTE can be installed on your smart phone, tablet, laptop and desktop. Once installed you have access to all the digital information you have organized in one convenient place no matter what device you are using.
So when you get to work in the morning and you receive an email with a detailed quote for a new grain bin you want to build, all you need to do is “forward” the email to your private EVERNOTE account ABCgrain@m.evernote.com and then you have access to the email on all of your computer devices, this comes in very handy if you are out of the office and need to have a copy of the email.
Now imagine you are visiting the Feed and Grain website and you find an article you would really like to keep, all you need to do is click on the EVERNOTE Elephant button in the upper right hand corner of your web browser and file the article to your EVERNOTE account.
EVERNOTE can be found incorporated into many of the browsers you are currently using such as Google Chrome, Internet Explorer, Firefox & Safari. Just look for the “elephant” and you will find EVERNOTE.
Finally, imagine you are visiting some local farmers and taking pictures of fields, bin sites, etc., and you want to file the pictures for futures use; simply send the picture via email to your EVERNOTE account.
We all struggle with how the manage the endless amounts of information, EVERNOTE is a great option to help tackle the the challenge. You can give the service a free try by going to www.evernote.com .