|
|
|
|
13 Nov 2008 15:25 EST DJ US Cash Grain Review: Sinking Barge Rates Lift Interior Basis
By Gary Wulf
Of DOW JONES NEWSWIRES
CENTRAL CITY, Neb. (Dow Jones)--Cash basis continued to climb on the domestic market Thursday, although some weakness was evident in premiums paid for corn at the Louisiana Gulf.
A rapid retreat in barge freight rates, from record highs set earlier in the month, has allowed corn and bean basis levels to jump 20-30 cents per bushel at grain terminals located along the interior U.S. rivers system.
"A late grain harvest this year put unusual pressure on the barge market, pushing Illinois River barge rates higher than had been at the time of Hurricane Katrina," noted basis analyst Kevin McNew. "Now, as harvest wanes, barge rates are falling fast, giving up 40 cents a bushel in the past week. More weakness should occur over the coming weeks, and this should help lift basis levels."
McNew notes that, on average during the past week, domestic basis levels have strengthened by 4 cents for corn and 8 cents for soybeans.
"Basis levels will continue to improve, in part from further declines on barge rates, but also on weakness in the futures market," which limits farmer sales incentive, said McNew.
Spot soybean and oat futures tumbled another 1-4 cents Thursday, although cash-contracts of corn and wheat both rose 3-7 cents at U.S. exchanges.
"Crude oil is about $2 higher helping to support [corn] prices," said analyst Alan Brugler, who also took note of some bullish fundamental factors. "American farmers still have 29% of the corn crop to harvest, or roughly 2.2 million acres. Basis is firming, as farmers are reluctant to sell at current prices, and [are] using the on-farm storage."
Gulf corn/grain sorghum basis dipped 3-4 cents Thursday, even though CIF spring wheat basis rallied 10 cents higher at ports in the Pacific Northwest.
"[Corn] demand remains weak, with China maybe exporting corn," said Linn Group analyst Jim Riley. "The news media also continues to report meat companies are having problems, which probably means a reduction in herds, so a reduction in feed or corn needs."
|
| |
|