Demand, weather support cash grain basis

U.S. cash grain basis levels remain soft, but solid underlying demand and outlooks for grain movement to slow as blizzard conditions grip the central U.S. this week are seen supporting the market. The market is filtering through the rash of fresh supplies delivered to elevators in early January, but with farmer sales slowing and poor transportation expected from a central U.S. storm that is expected to dump as much as two feet of snow, the basis will be supported, a cash connected CBOT broker said.

Basis is the difference between cash prices and futures. Export basis levels for soybeans have been supported by strong demand, with weekly export sales reported by U.S. Department of Agriculture last week exceeding analysts' expectations. Basis levels for hard red spring futures are strengthening on increased demand for high quality U.S. wheat and the potential transportation problems from adverse weather in the central U.S. this week.

"Concerns are building over the availability of high-grade milling wheat in the world market," said Karl Setzer, analyst with MaxYield Cooperative. "It is becoming increasingly clear that the United States is going to be the primary source for milling wheat, as export bookings are leading last year by 60 percent," Setzer added. The cash basis for hard red spring wheat for rail in Minneapolis is up 65 cents a bushel at US$2.65 over March futures Monday, according to U.S. Department of Agriculture and US cash grain merchants. Read more...

This blog is written by Martin Little The Global Miller, published and supported by the GFMT Magazine from Perendale Publishers.