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Soybean Basis Plummets across the US

Soybean Basis Plummets across the US

28 May 2013

ANALYSIS - On average, spot soybean basis dropped 51 cents across the US last week while the corn basis held firm only improving 1 ½ cents on the week, writes analysts at GeoGrain.

GeoGrainThe July soybean contract was the big mover last week with prices rallying sharply since last Thursday. This sharp rally was triggered by tight domestic old crop stocks, a strike at Argentina ports and the rumors that a Chinese bean crusher was short July futures. The move seemed to come to a head at 12:20 CST on Thursday when it printed a high of 1546 ¾.

As July soybean prices charged higher basis at key river terminals and crushing plants aggressively dropped their basis, sometimes multiple times each day. The result was a dramatic 71 cent drop in average soybean basis at crush facilities and a 51 cent drop at river terminals.

The soybean basis collapse seemed to be driven by increased farmer selling, but is also explained by convergence of the futures and cash price as we get closer to the last trade date on the July futures. We have observed many elevators switching to the August, September and November futures contract when quoting spot bids.

Corn basis maintained a strong basis throughout the US, improving by only 1 ½ cents on average across the country. Ethanol plant bids were mostly unchanged which was supported by firm ethanol grind margins and a strong ethanol production report on Wednesday. Corn basis along the river improved 2 cents.

GeoGrain Cash Basis

To illustrate how rapidly bean basis has fallen, below is a one month chart of soybean basis at two key soybean markets in Illinois. The drop in basis has been incredibly sharp which has offset the equally sharp move higher in July soybean prices.

GeoGrain

Top image via Shutterstock



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