December 19, 2012 | Grain Hedge Insights | Jackie Roembke | Views: 180

Soy Basis Surges on Demand Strength

US average soybean basis levels were up 4 cents a bushel for the week, bolstered by a strong crush and export sector.

U.S. average soybean basis levels were up 4 cents a bushel for the week, bolstered by a strong crush and export sector.

The soybean basis strength was greatest around the river system especially southern reaches of the Mississippi river and the Ohio river. River markets on average gained 7 cents a bushel on basis for the week, helped by a 5-cent gain at the Gulf where exports are robust. This week’s export sales report showed a marketing year high of 1.3 MMT of business for soybeans, with 1.0 MMT going to China. Also buoying the bean market is strong domestic crush.  NOPA’s monthly crush estimate of 157.3 mb for November is the biggest November crush since 2009 and the biggest monthly figure overall since January 2010. Domestic crush operators increased basis levels by 4 cents for the week

For corn, basis levels reflect the state of demand with basis levels up a modest 1-cent a bushel for the week.  Ethanol production was off 1.3% this week reflecting continued tight margins for ethanol plants. On average, ethanol plants were unchanged on basis for the week suggesting producers have little room to bid up basis even with tight pipeline supplies of corn. In the export market, the U.S. continues to see sluggish sales and stiff competition from Brazil suggesting prices may need to back off if export numbers are going to accelerate and meet USDA’s annual forecast. This week, Gulf basis plummeted 16 cents a bushel and river markets followed lower as well, losing 4 cents on the week.

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