Summer Basis Outlook & Impacts
ND corn, soybean, and wheat basis have been less enthusiastic lately, especially when we look back at historic values. There are several impacting factors causing this; however, I’m just going to touch base on a few and how they are undermining the local basis levels.
ND Corn Basis is Under Pressure
For starters, the USDA has pointed to a large crop in North Dakota and shows farms in the state sitting on about 70 million more bushels than they had at this time last year. So that kind of a large on-farm quantity hinders basis improvement, as there are thought to be large amounts on farm that will need to move to make room for harvest.
In the eastern half of the state, seeing both Tharaldson Energy and Dakota Spirit showing no bid over the summer, it seems likely there are bigger quantities out there. After doing business with those plants for the past 13 years and have yet to see a no-bid from either, which is a strong sign that supplies remain heavy.
Soybean Basis Follows Seasonal Pressure
Soybean bids across the state are also less than ideal, and much of that comes down to timing. PNW bids have mostly dried up, which is not unusual at this time of year because South America has taken over the export window. Outside of trucking distance to a major crush facility, values have slipped into triple digits. That is partly due to weaker export demand.
Many elevators also appear to prefer handling corn already in the bins rather than filling those same bins a quarter of the way with soybeans and holding them until harvest.
On the other hand, crush facilities are posting the most aggressive bids we have seen this year. We spent all winter with a basis inversion, where nearby cash prices were often equal to or better than deferred bids, pushing soybeans to crush earlier. Within trucking distance, elevators are using crush as a key outlet for soybeans, which keeps bins turning and avoids tying up a larger bin with only a small number of bushels.
Wheat Basis Is Slipping into Planting and Harvest
Wheat basis typically backs off going into planting because farm deliveries slow while producers are busy in the field, and mills buy in demand before planting. The local mill has pulled back some, but it is still relatively aggressive for this time of year. Many elevator bids are not keeping pace because domestic mills filled their needs before planting.
We are also getting closer to the Southern U.S. wheat harvest, which will add another wave of supply into the demand chain. That extra supply should keep pressure on the basis for the next few months dependent on quality.
Rail Fuel Surcharges Are a Major Headwind
A major factor affecting all commodities right now is the fuel surcharge being added by railroads because of elevated fuel prices. Those costs are hitting everyone’s bottom line, and they have become a real point of contention.
Before planting wraps up, elevators often begin positioning shuttles for June and July, and basis typically strengthens in May as buyers try to secure bushels. There has been some improvement, and I have received multiple calls from elevators looking for grain. Still, many times there is no push at all, and when there is, it is minimal.
Current fuel surcharge rates in the area are running around 40 to 50 cents per bushel. That kind of charge limits how far basis can improve. Using the middle of that range, 45 cents, and subtracting it from the average corn basis we are seeing now, around -70 cents, puts the net basis near -25 cents. That would be historically strong for June and July timing. The challenge is that July fuel surcharges are being set in May, and those values will not be negotiable. That will have a major impact on basis levels.
What to Watch This Summer
Basis may improve some from current levels, but heavy supplies, seasonal soybean export shifts, wheat harvest pressure, and rail fuel surcharges are all working against a strong rally. For now, the market looks likely to stay selective, with the best opportunities still tied to location, freight advantage, and nearby demand.
Alex Andel
Basis and Freight | Market Advisor, Northern Plains
As our basis and freight expert, Alex assesses current market conditions and forecasts future scenarios. His keen insights create transparency in the cash market, resulting in significant returns for our clients.
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