Cash Corn Basis Levels Hold Steady Despite Futures Rally

The strong rally in corn futures on Thursday took cash prices higher and brought some fresh farmer selling into the market. The average basis level in interior markets remained steady at 41 cents under the Chicago March futures contract on firm demand. Ethanol producers are moderately aggressive in their approach to buying corn as demand for ethanol continues to be strong.

The best corn bids at ethanol plants across the country are ranging from 12 cents over the Chicago March futures in the Great Lake Region to 40 cents under the Chicago March futures in the eastern South Dakota region. Ethanol bids at present are not any higher than other elevators, corn processors or livestock producers in their respective areas. Generally, corn buyers, including ethanol plants, had a sizeable amount corn bought to arrive into the New Year. Deliveries have been arriving into elevators, processing plants and feeders at a steady pace which keeps buyers from having to scramble to acquire additional bushels.

Ethanol futures are directly influenced by higher corn futures prices, so when corn rallies it is almost a sure bet that ethanol will also. Gasoline markets are strong and look to remain that way with the driving season just around the corner. This being the case, ethanol production will continue at a steady pace. Margins for ethanol producers have tightened with stronger corn prices, but with ethanol demand expected to increase in the summer months that could improve. Ethanol exports have also been on the rise which provides additional demand.

There is some concern about low corn ending stocks for this crop year, but until a situation develops that becomes dire, don’t expect any changes in supply and demand projections regarding ethanol use. The mandated amount of corn for ethanol use has already been calculated in supply and demand estimates and the carryout while low is deemed adequate.

(Source: http://www.dtnprogressivefarmer.com/dtnag/view/blog/getBlog.do;jsessionid=FBE7AB3B3B0A44841043993A9E4E9282.agfreejvm2?blogHandle=ethanol&blogEntryId=8a82c0bc2da1a99e012e3b021a650707)