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Weekly Cash Comments

Cash Commentary-

Corn basis saw modest growth this week advancing 2 cents a bushel on average across the country, but bean basis was unchanged thanks to higher futures and better farmer selling.

In corn, basis levels were up largely driven by strength at ethanol plants in the Western Cornbelt. On average, ethanol plants posted a 3-cent gains but in the Western Cornbelt plants were up 5 to 10 cents a bushel in some cases. This week's ethanol production was off 17,000 barrels per day from the previous week, but year-to-date production is still well ahead of last year's pace. At the Gulf, export basis gained 2 cents a bushel but river terminals on average were up slightly less than that. Southern stretches of the Mississippi river and the Ohio River saw corn basis strength this week.

For beans, average basis levels were flat across the country, but soy crushing plants as a group were off 2 cents a bushel. Deliveries appeared to pick up this week with soybean futures shooting higher early in the week thanks to the threat of a Brazilian trucker strike. Also, bad weather in the US eastern Cornbelt kept plants in Indiana and Ohio bidding higher for beans as farm movement slowed, while river terminals along the Ohio River encouraged farmers to deliver beans over corn to their facilities. On average, river terminal basis levels were unchanged for the week in spite of a 4-cent advance at the Gulf.

Futures Commentary-

Corn and wheat prices fell this week down 9 ¾ cents and 24 ½ cents respectively, while soybean prices rallied 16 ¾ cents on news of Brazil trucking disruptions. Truckers in Brazil are protesting higher diesel prices by using road blocks and parking their rigs on the shoulders of Highway BR 163 to interrupt harvest grain flow throughout the country. The protest began on Wednesday in two small towns with a group of transportation companies and independent truckers but quickly spread to surrounding towns. Truckers are looking for the state government to reduce the diesel tax. The strike has slowed fuel delivery throughout the country cutting off the supply of fuel for many farmers during harvest. The strike has also disrupted the flow of grain to the ports making traders nervous that delays could push soybean sales onto the U.S. books.

The trucker strike continues in Brazil even after the Government offered truckers a year of free financing for vehicles from the state development bank, an offer to keep diesel prices unchanged for six months and to help truckers work out a framework for setting freight rates. This offer by the government resulted in some truckers quitting the strike and clearing off the roadside, but many roads throughout Brazil are still blocked. On Thursday, in an attempt to break the trucker strike, Brazil's Justice Minister said that the government would impose fines of about $1,700-$3,400 per hour on trucks who have blocked roadways. Despite the threat of fines truckers continue to block traffic throughout Brazil.

Following a cancellation of the Egypt wheat tender last Wednesday due to “exaggerated U.S. wheat prices”, Egypt's GASC bought 120,000 metric tons of U.S. HRW wheat announced on Wednesday. Egypt was looking to make use of a 100 million dollar line of credit provided by the U.S. Government to be used for the purchase of U.S. wheat. Although this should not be expected as the norm, the sale shows that prices are close to being competitive on the global market. Wheat prices seem to have found support during Thursdays trading session after holding a major support level of $4.92 ¼ which was the low back on February 2nd.

Exports sales for corn were weaker than expected, while wheat and soybeans reported sales on the low side of analyst expectations. For the week ending February 19th corn export sales totaled to 715,800 MT which was down 23 percent from last week. Analysts were expecting to see corn sales between 900,000 and 1,100,000 metric tons. Despite the weaker than expected export sales this week, cumulative corn sales running well ahead of the pace needed to meet USDA expectations with 34.8 million metric tons sold this year.

Soybean export sales were on the low side of expectations booking 459,200 MT. However, soybeans have booked 47.12 MMT already this year, well ahead of the pace needed to meet USDA expectations. Last year during this week only 43.4 MMT of soybeans were booked. Wheat sales were reported 328,300 metric tons of sales, within the analyst expectations and up 23 percent from the previous week.

Weather forecasts in Brazil continue to show moisture in the forecast which has been interrupting the safrinha corn planting pace. More rain is expected in the northern part of Brazil for the rest of the week and throughout the 6-15 day outlook. There are some slight concerns that the delays in planting could lead to additional acreage and yield loss throughout Moto Grosso.

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