Basis surges as buyers scrape bottom of soy bin

 

 

Basis - a differential between futures-market and local cash prices reflective of local supply-and-demand conditions - has leapt 20-35 cents per bushel at numerous processing and export markets from South Dakota to Tennessee this week, with some major processors boosting bean basis bids by 10-15 cents during the past 24 hours alone.

 

"The market has a whiff of panic in the air...clearly people are scrambling to secure whatever old-crop supplies are available," said Greg Wagner, senior commodity analyst for Ag Resource Co. in Chicago.

 

"There is still meal demand out there so they need to keep crushing," said Jim Hemminger with Top Third Ag Marketing. "In the last day, the bean basis in the western corn belt and the South has jumped dramatically... part of that has to do with the crop being late...normally we would start to get early-cut beans by now to supply the crushers, but the reality is, that they can't find enough beans."

 

A cool spring delayed planting, and spring floods in parts of the Midwest also forced farmers to reseed late in the season. Much of the US crop is lagging behind developmentally because of it.

 

The flat-price cost of soymeal stands at well above $400 per ton in many areas.

 

"Meal remains scarce in many locations with basis levels jumping as much as US$10/tonne in spots [Thursday] as tight stocks and the late harvest have reduced meal stocks to below pipeline levels in some areas," said the Hightower Report.

 

The so-called country movement of soy from farm to market has been restricted by a smaller soy crop in 2007, recently depressed soy prices - which have dropped more than US$1.50 in the past two weeks - and hurricane rains that have virtually halted new-crop harvest across the Deep South, allowing mould and fungus to attack unpicked beans.

 

"That [Delta soy] crop was already compromised by dryness and now it gets dumped on with rain," said Wagner at Ag Resource. "Not only can't you get it out of the field, but when you get it out of the field it's of questionable quality," he added.

 

Some soy that farmers were able to harvest this week reached elevator scales carrying damage of 15 percent to 50 percent, which Wagner said commercials will be reluctant to market until they can be blended with better-quality beans, a situation he likens to, "a de facto harvest embargo."

 

CIF soy basis at ports in the Louisiana Gulf has also climbed 20 cents a bushel this week, as tightening pipeline supplies begin to impact exporters.

 

"A combination of tiny year-end stocks and a rain-delayed southern harvest has limited the amount of soy moving into the export pipeline," said Rich Balvanz of AMS Commodities. "More harvest delays are expected from rains associated with Hurricane Ike."

 

Although deferred soy futures ended lower, the Chicago Board of Trade's thinly traded September soy skyrocketed higher by nearly 35 cents a bushel Thursday. Ahead of the contract's expiration Friday the September contract was as much as $2.04 a bushel higher at $14.20.

 

"Somebody wants to buy beans and they'll do what it takes to get the job done, even if it means taking delivery via futures contracts," said an Iowa grain processor.