See national chem pricing trends in the FBN Research report
Corn: Corn basis has stabilized and improved throughout September reverting back toward the 10 year moving average. National spot vs. December '24 basis increased .92 cents over the last 10 days compared to the 10 year average, which declined 3.08 cents and a decline of 5.87 cents in ‘23 during the same period. Harvest is now 9% complete, which is in line with last year's pace but 3 points ahead of the five-year average.
Ethanol plant basis improved 4 cents week over week in Minnesota, but was generally flat to weaker across the other core ethanol producing states. Missouri, which is 25% harvested, saw the largest decline in corn basis at ethanol plants, declining to an average basis of -$.41Z from -$.28Z last week.
Grain barge movement on the Mississippi River for the week of September 17th was 109% higher than last year and 16% higher than the three year moving average. Barge grain movement has been above average since mid-August which corresponds to when corn basis began to stabilize.
Corn movement along the Mississippi is expected to pick up in the next month. For the week ending September 12th, 1.6 mmt of grain was inspected for export, up 6% from the 3-year average. The key thing to note however is that export inspections will begin to spike when we reach October, which is a critical part of our export season except this year we are starting the season with low water levels in the Mississippi River, which might delay grain movement to the Gulf. ACBL has already implemented draft and tow-size restrictions and expects transit delays due to reduced navigable space in certain areas.
FOB basis has strengthened at the export markets with FOB U.S. Gulf basis increasing 2.4 cents per bushel and FOB Brazil increasing 3 cents over the last 10 days. Concerns that record drought in Brazil could linger into the planting season is beginning to put a bid under flat price corn. Although there is still time for the weather to cooperate, if drought continues into October, corn prices may start to build in a risk premium.
So what does this mean for corn basis? Our opinion is that the average spot corn basis across the U.S. has already printed its lows, but the post harvest rally faces some headwinds. This year's typical post harvest basis rally may be muted by low water levels along the Mississippi River, slows the flow of grain exports and traps more grain inland. This scenario negatively pressures the basis. Brazil’s drought is a wild card now, so keep a close watch on Brazilian weather as they move into the planting season next month. Continued drought in Brazil could lift corn globally.
Soybeans: The pace of soybean basis decline, which started mid-July, has slowed as we near the 10-year average. National average spot soybean basis vs. November '24 decreased 2.53 cents over the last 10 days compared to the 10 year average decline of 17.8 cents and the 4.79 cent decline observed last year during the same period. Harvest is now 6% complete with the majority of progress being in Louisiana, Mississippi, Arkansas, and Tennessee.
Our opinion on soybean basis is that it is likely to follow typical seasonal lows, bottoming in the beginning of October. However, soybean basis will be very sensitive to river transportation delays as the export program is generally front loaded in the first half of the crop marketing year. With a USDA estimated U.S. production of 4.586 billion bushels this year it may be difficult for soybean basis to gain much traction after harvest.
On September 3rd, the daily sea surface temperature anomaly in the Niño 3.4 Region was recorded at -0.5 °C, which is characteristic of La Niña. In NOAA’s latest report they stated ENSO-neutral conditions are currently present, and that La Niña has a 66% chance of emerging in September and November, and a 74% chance of forming between November and January. So, with the likelihood of La Niña increasing in the coming months, what can we expect for key growing regions this winter?
Refinitiv’s Sr Weather Analyst, Isaac Hankes, predicts a weak but persistent La Niña through December-February. Based on top analog years, he forecasts a moderate weather pattern throughout Brazil, which is currently dealing with dry weather. With only moderate rainfall expected, there is some concern that mid-season moisture may not be enough to offset existing drought conditions. In Argentina, the weather forecast points to drier conditions which, if realized, could negatively impact crops during key development stages.
In North America, Hankes forecasts mild, dry conditions with the Midwest, Central and Western regions all near normal temps. For wheat growers in the U.S. Plains, these forecasts indicate a reduced risk of winterkill, but dry conditions pose a threat of drought. This is particularly concerning given the low water levels on the Mississippi River, which are already hindering barge shipments, raising transportation costs, and reducing the competitiveness of U.S. exports.
In Europe, Hankes forecasts an increased risk for cold and dry conditions in Central Europe to the Black Sea region. This increases the possibility of winterkill, which could lend some support to a wheat market that has struggled to gain traction over the last year.
Over the last 7 days, the U.S. average spot Corn basis, calculated off the Dec ‘24 futures contract, has increased 2.09 cents. This contrasts with the 10-year average change of -2.937 cents during the same time period. Historically, the 10-year data shows an even split, with five years recording a positive basis change and 5 years recording a negative basis change during this time period. The recent 2.09-cent increase marks the first sign of strength in corn basis since mid-July.
The US Average Soybean basis, calculated off the Nov ‘24 futures, has weakened by 8.232 cents over the last 7 days. This decline is larger than the 10-year average decrease of 5.77 cents for the same period. Weakening soybean basis is common during this period, with 9 out of the last 10 years recording similar declines.
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