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24 Jul 2008 15:19 EDT DJ US Cash Grain Review: Gulf Basis Weakening On River Closure
By Rebecca Townsend
Of DOW JONES NEWSWIRES
CHICAGO (Dow Jones)--Gulf export basis for export-bound grains and soy will likely weaken until the lower Mississippi River reopens after an oil spill, grain buyers and analysts say.
But weakening futures markets are slowing farmer commodity sales, which may act to tighten the overall interior basis, said U.S. Commodities analyst Jason Roose.
The Chicago Board of Trade August soybean contracts continued their slide Thursday, closing down 9 1/4 cents at $13.85, while CBOT September corn put the brakes on a week's worth of losses, closing up 1 1/2 cents at $5.73. U.S. wheat also closed around 4 1/2 cents higher.
"Most of the strength in basis levels was away from the river system this past week," said Kevin McNew, a commodities analyst and Cash Grain Bids founder. "Although barge rates have come down after flood levels subsided, export business has slowed substantially for old-crop corn and beans, putting pressure on Gulf export basis levels. Both corn and bean basis were lower at the Gulf this past week, with soybean basis off over 15 cents a bushel."
Corn basis held steady or slightly fell in sections of the South, while the greatest gains were seen in Iowa, Missouri and parts of Minnesota, South Dakota and Wisconsin, McNew said.
Soybean basis not affected by the Gulf export trade has seen gains of 4 cents or more, he added.
"Especially in the eastern corn belt of Indiana and Ohio, basis levels jumped higher as processors in these states aggressively bid up basis," McNew said. "Some key processors were up 15 cents on basis for the week."
Analysts and buyers expect U.S. wheat to weaken.
"The harvest is moving northward, [which] can result in harvest pressure on prices," said Bill Nelson, a commodities analyst with Wachovia. "The weather forecasts remain bearish. Spring wheat areas are expecting some precipitation in the next few days while Australian wheat areas have been receiving some much needed moisture."
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