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18 Sep 2008 09:41 EDT DJ US Cash Grain Outlook: Spot Soybean Basis In Rapid Retreat
By Gary Wulf
Of DOW JONES NEWSWIRES
CENTRAL CITY, Neb. (Dow Jones)--Spot soybean basis has begun to weaken rapidly, as buyers anticipate the imminent delivery of new-crop supplies.
"The warm and dry weather forecasted throughout next week for most of the Midwest will lead to some soybean harvest as early as next week," said Country Hedging. "There have been early reports of harvest in Nebraska, with better-than-expected yields on irrigated ground."
With test cuttings also said to be underway as far north as Illinois, domestic soybean basis declined by an average of 5 1/4 cents throughout the U.S. interior Thursday. Premiums plunged 33-74 cents in such major markets as Cincinnati and Chicago in just 24 hours.
"The (soybean) trade is very anxious and expects to hear yield reports during the next few/several days," said independent analyst Duane Lowry. "Any sense of disappointing yields can quickly send this market sharply higher."
USDA Friday estimated domestic stocks of old-crop soybeans at a scant 140 million bushels as of the beginning of the month, which is thought to be close to the minimum possible pipeline supply.
"The impact on basis from harvest should be large, especially for soybeans, where basis levels might be as much as a $1 per bushel lower than current levels," warned Kevin McNew of Cash Grain Bids Inc.
Weakness was also seen in domestic wheat basis Thursday, as daily values dropped off by an average of 3/4 cent for hard red winter/spring wheat and 2 1/2 cents for SRW wheat, although corn/grain sorghum basis both held firm.
U.S. grain futures also showed resilience overnight, which allowed cash-contracts to close out Globex trading with gains of 2 cents for oats, almost 4 cents for corn, and 6-9 cents for soybeans/wheat.
"For more than a month, commodities have been toxic in the world of money managers, but suddenly they're back in vogue, as troubled investors look for someplace to put their cash in the wake of this week's market meltdown on Wall Street," said Bryce Knorr of Farm Futures. "That buying looks ready to continue this morning."
National cash price indices maintained at the Minneapolis Grain Exchange currently stand at $10.92 for soybeans, indicating an average basis level of -47 cents relative to Nov CBOT soybean futures. Domestic cash prices also average $5.11 1/4 for corn (-42 3/4 cents basis Dec CBOT corn), $6.71 1/2 for hard red winter wheat (-90 cents basis KCBT Dec wheat), $4.99 for soft red winter wheat (-$2.26 3/4 basis CBOT Dec wheat) and $7.33 for hard red spring wheat (-56 1/4 cents basis MGEX Dec wheat futures).
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