January 26, 2004

Slower Farm Sales Supporting US Soy Basis

Truck soybean basis continues to recover in the U.S. interior market, rising by an average of 1 1/2 cents a bushel at all locations.

A cooling off in the recent heated pace of farmer selling helped to support spot soybean premiums. The slowdown in country movement was produced by arctic weather in the northern U.S. and a retrenchment in prices that began after futures hit 6 1/2-year highs last week.

Grain terminals reporting to the Chicago Board of Trade saw cash soybean receipts drop 30% from week-ago levels on Thursday, with deliveries also off 36% for corn, and 66% for soft red winter wheat.

While corn and wheat basis was nearly unchanged Thursday, nearby cash premiums for grain sorghum dropped by an average of 1/2c, reflecting a recent dip in export demand for that feed grain.

Grain futures posted broad declines in overnight trading at the CBOT, with cash contracts off 3c for soybeans, 2c for corn and 1 1/2c for soft red winter wheat.

Pressure came from lackluster export demand - possibly the result of expensive ocean freight and this week's Lunar New Year market holiday in Asia -  plus increased competition from Australia on the world wheat market, and the failure of U.S. officials to ban livestock protein from pork and poultry feed, as has been widely expected.

Talk of surprisingly high soybean yields is also coming out of early harvested fields in Brazil, placing further pressure on U.S. soy futures.

"Soybean yields in Mato Grosso ¨C Brazil's top soybean growing state - are coming in better than expected," said Rich Balvanz, of Ag Management Services in Monticello, Iowa. "That region was hardest hit by Asian rust (fungus) in 2003. But farmers have taken the bull by the horns with extensive monitoring and treatment regimes, and the effort apparently is paying off."

Brazil is expected to produce its largest soybean crop in history this season, possibly surpassing 2.2 billion bushels.

Cash price indexes maintained by the Minneapolis Grain Exchange presently place elevator-level bids for U.S. grain at approximate averages of: $2.55 1/2 for corn (down 1c Thursday), $8.11 for soybeans (down 1 1/4c), $3.70 1/4 for hard winter wheat (down 2 1/2c), $3.68 3/4 for SRW wheat (down 3 1/4c), $3.73 3/4 for spring wheat (down 2 3/4c), $3.66 3/4 for soft white wheat (down 4 3/4c) and $3.90 1/2 for durum (up 1 3/4c).