US Cash Grain Outlook: Storm Halts Corn Movement, Firms Basis

By Gary Wulf
Of DOW JONES NEWSWIRES

SUPERIOR, Neb. (Dow Jones)--The U.S. grain belt is being buffeted by the first major winter storm of the season Tuesday, with heavy snow falling across the central Plains and Midwest and rain drenching the Deep South.

U.S. Department of Agriculture agricultural meteorologist Eric Luebehusen said the storm is curtailing fieldwork and threatening to damage millions of acres of "unharvested corn, which could be toppled by high winds."

The gale is producing a beneficial impact on domestic corn basis--the difference between cash and futures prices--holding values steady, which have recently shown significant weakness.

"A massive winter storm will delay harvest, as well as delivery of corn to end users," said Country Hedging analyst Steve Wagner.

The USDA Monday placed the U.S. corn harvest at 88% complete, adding that only 94% of the nation's grain sorghum had been picked as the week began.

"Harvest progress remains at a snail's pace, as the majority of the remaining acres are those that are excessively wet and have struggled to shed much, if any, of their excess moisture over the past month," said Benson Quinn Commodities corn market analyst Jon Michalscheck, who points out that Monday's USDA data, "would indicate that approximately 1.55 billion bushels [of corn] are still in the field."

Although interior soybean basis also averaged about steady, daily readings of domestic wheat basis had dropped 1 cent to 3 cents per bushel Tuesday.

"The biggest market factor impacting wheat is probably export sales," offered Oklahoma State University extension economist Dr. Kim Anderson.

In November, the USDA estimated total wheat exports for 2009/10 would drop 14% to 875 million bushels, but Anderson notes that export sales and shipments are currently off 28% from last year's pace. The USDA will release updated supply and demand estimates Thursday.

"The wheat export estimate may be lower and ending stocks increased," warns Anderson. "Current U.S. wheat prices are about 50 cents above our competitors' prices. Without some surprise, there isn't much reason for wheat prices to go higher."

National cash price indices maintained by the Minneapolis Grain Exchange ended Monday at $9.97 for soybeans, reflecting an average basis of -56 cents relative to the settlement of January CBOT futures. Domestic cash prices also averaged $3.29 1/4 for corn (-54 1/2 cents basis March CBOT), $4.42 for hard red winter wheat (-95 cents basis March KCBT), $4.28 1/2 for soft red winter wheat (-$1.19 1/2 basis March CBOT) and $5.30 for hard red spring wheat (-24 1/4 cents basis March MGE).

CROP WEATHER

"A massive early winter storm will generate heavy snow and strong winds from the southern Rockies into the Corn Belt and Great Lakes Region, while arctic air surges southward over the central Plains," forecast Luebehusen. "Meanwhile, Gulf moisture feeding into the storm will produce heavy rain from the lower Mississippi Valley into the Mid-Atlantic States."

The National Weather Service's 6- to 10-day outlook for December 13-17 calls for near- to above-normal precipitation nationwide. Wet conditions will be most likely in the Southeast and Northwest.

-By Gary Wulf; Dow Jones Newswires; Gary.Wulf@dowjones.com

(END) Dow Jones Newswires
12-08-09 1010ET
Copyright (c) 2009 Dow Jones & Company, Inc.