Spreads and Gulf Basis are FIRE - Futures to Follow? (Soybeans and Corn)

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🌊 Improving Basis Bids at the US Gulf

Corn and soybean basis bids at the US Gulf have shown improvement this week.

Soybean basis bids have become notably strong due to:

Improved export demand.

Falling water levels on the Mississippi River.

CIF October soybean barges are currently bid at 112 cents over the Nov24 CBOT contract, marking the strongest level since August 2023.

Corn demand, especially from Mexico, has also improved, contributing to the basis enhancement.

🌧️ Drought Conditions Update

The latest weekly drought monitor data indicates that:

The Corn Belt experienced mostly dry conditions last week, with some rain in the northern regions.

Drought conditions improved in northern Minnesota, but overall, nearly 83% of the Corn Belt is facing some level of drought.

The High Plains are still under a hot and dry weather pattern, with worsening drought conditions from South Dakota to Oklahoma.

Drought Statistics:

Corn: 62%

Soybeans: 54%

Winter Wheat: 52%

Spring Wheat: 32%

Cattle: 52%

🌱 Oversupply of Soybeans Amid Biofuel Production

Despite increased biofuel production (up 400% since 2021), soybean supplies are piling up due to:

Big crop yields and reduced export demand for US soybeans.

An influx of imported used cooking oil used for biofuel production.

Low water levels on the Mississippi River and the unexpected closure of ADM's crush plant in Iowa are further pressuring the soybean market.

🛢️ Ethanol Production Update

US ethanol production increased for the third consecutive week, reaching:

1.04 million barrels per day, a 3.8% increase from the same week last year.

Ethanol stocks reached 22.3 million barrels, the highest for this time of year.

However, implied gasoline demand saw a significant drop of 11% compared to last week, despite being slightly up from the same week last year.

📈 Flash Sales and Export Activity

USDA reported multiple flash sales on Thursday:

197,180 metric tons (8 million bushels) of corn sold to Mexico for the 2024/2025 marketing year.

101,000 metric tons (4 million bushels) of corn sold to unknown destinations for the same marketing year.

Since the start of the week, exporters have sold a total of 2.3 million metric tons (89 million bushels) of corn through flash sales.

In Summary

The agricultural landscape is marked by improved basis bids, ongoing drought challenges, and a complex interplay of supply and demand in the soybean and corn markets. As harvest progresses and weather patterns evolve, all eyes will be on how these factors will influence market dynamics in the coming weeks! 🌾📊