Transcript Document

Soybean Basis Developments:
Understanding How Transportation Costs, Service and
Capacity Affect Producer Returns
A Presentation to the
Soy Transportation Coalition
Chicago Marriott O’Hare
December 10, 2007
Presented by
Mark D. Newman, President
Market Solutions LLC
4306 Leland Street, Suite 101
Chevy Chase, MD 20815 USA
Tel: (301) 654-2949
Fax: (301) 654-4742
[email protected]
www.marketsolutionsllc.com
Overview
 Market Solutions LLC has begun an analysis to help the Soy Transportation
Coalition (STC) understand the extent to which soybean basis is widening, the
role of transportation costs, service and capacity in this situation, and what
might be done about it.
 Soybean basis is the difference between the cash price offered at a delivery
location and the nearby soybean contract price on the Chicago Board of Trade
(CBOT).
 Basis is generally a result of costs of transportation, storage, interest and
local supply and demand conditions.
 Soybean basis has been widening in recent years, meaning that many
producers are getting as smaller share of the CBOT price.
 Soybean prices are currently relatively high, so many producers may not
notice to the money they are losing to increased basis.. but if and when overall
price levels fall, there is no reason to think that basis will narrow, especially if
the widening is because transportation costs have increased.
1
The Trend Toward Wider Soybean Basis is Clear
 Across a growing share of the country, soybean basis has gradually become
wider and more negative over the last ten years.
 The following maps, produced using price data from over 2600 locations by
Cash Grain Bids Inc. provide a national overview of basis change for the months
of October for 2006 and 2007 compared to averages for the last five and ten
years. Similar analysis is also presented for February and June.
 More detailed basis maps are presented for Illinois, Indiana, Iowa, Nebraska,
North Dakota, Ohio and South Dakota. The consistent message from all of them
is that many farmers are getting less of the futures price for their soybeans.
 Data sets including price and basis data have also been developed for more
than 50 specific locations across the country, including elevators that receive rail
cars at single car rail rates, elevators with unit and shuttle train capability, port
and river elevators with access to barge shipping, and soybean processing
facilities.
 Analysis is just beginning to help determine how transportation costs, service
and capacity contribute to basis differences and changes at specific locations.
2
October 2007 Average Soybean Basis
Source: Cash Grain Bids Inc for Market Solutions LLC
3
October 2006 Average Soybean Basis
Source: Cash Grain Bids Inc for Market Solutions LLC
4
October - 5 Year Average Soybean Basis
Source: Cash Grain Bids Inc for Market Solutions LLC
5
October 10 Year Average Soybean Basis
Source: Cash Grain Bids Inc for Market Solutions LLC
6
October Soybean Basis: 2007 vs. 10 year Average
October 10 Year Ave
October 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
7
February Soybean Basis: 2007 vs. 10 year Average
February - 10 Year Ave
February 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
8
June Soybean Basis: 2007 vs. 10 year Average
June - 10 Year Ave
June 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
9
February Soybean Basis: 2007 vs. 2006
February - 2006
February 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
10
June Soybean Basis: 2007 vs. 2006
June 2006
June 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
11
October Soybean Basis: 2007 vs. 2006
October 2006
October 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
12
October Soybean Basis: 2007 vs. 5 year Average
October 5 Year Ave
October 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
13
June Soybean Basis: 2007 vs. 5 year Average
June 5 Year Ave
June 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
14
February Soybean Basis: 2007 vs. 5 year Average
February 5 Year Ave
February 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
15
State Level Basis Data and Maps
 Detailed basis data for more than 50 locations has been
developed to permit additional analysis of the role of
transportation in the difference in basis facing producers at
locations. The points selected are shown on the following map.
 Charts that follow show individual states, and basis in 2007
compared to the five year average. This is followed by a list of
locations in the state for which basis data has been obtained.
 To help in thinking about how to proceed with state level analysis
it would be useful to get feedback about these specific locations
and factors that should be considered in determining why basis
varies among them.
16
Basis Data Locations for Additional Analysis
Legend
– Country elevator
Export/River market
Processor
17
October 2007 Basis at Select Locations
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
-150.05
-138.68
-130.50
-121.57
-118.52
-116.60
-115.13
-112.00
-110.33
-105.69
-103.39
-99.94
-97.22
-96.09
-95.91
-95.00
-88.41
-85.15
-84.35
-78.65
-78.30
-76.53
-74.70
-74.65
-74.33
-73.00
-72.22
-70.94
-70.09
-66.39
-64.00
-63.87
-62.65
-62.60
-60.53
-60.53
-57.43
-54.18
-52.83
-51.83
-48.70
-47.40
-44.65
-41.57
-39.83
-36.65
-30.27
-29.70
-28.33
-25.25
-19.00
-7.78
30.48
Gregory
SD
Aberdeen
SD
Finley
ND
Bellwood
NE
Brandon
MN
Gothenburg
NE
Nashua
IA
Durand
WI
Volga
SD
Dunlap
IA
Larned
KS
Cambria
WI
Minneota
MN
Ashton
IA
Livermore
IA
Deerfield
OH
Hardin
MO
Webberville
MI
Lincoln
NE
Savage
MN
Mankato
MN
Lamar
MO
Rushville
IL
DeGraff
OH
Central
MD
Fairfield
IA
Zeeland
MI
Circleville
OH
Cedar Rapids
IA
Des Moines
IA
Maumee
OH
Davenport
IA
Hennepin
IL
Shelbina
MO
Rochelle
IL
Linden
IN
Marion
OH
Decatur
IN
Kokomo
IN
Portage
IN
Nashville
IL
Greensburg
IN
Stonington
IL
Emporia
KS
Clarendon
AR
Paxton
IL
Bloomington
IL
Evansville
IN
Norfolk
VA
St Louis
MO
Lower Eastern Shore
MD
Fayetteville
18NC
Gulf
LA
Gregory Farmers
South Dakota Wheat Growers
Finley Farmers Grain
Frontier Coop
Pro Ag Farmers Coop
Farmland Service Coop
Five Star Farmers Coop
Countryside Coop
South Dakota Soybean Processor
United Western Coop
Pawnee County Coop
Landmark Coop
Farmers Coop
United Farmers Coop
Gold Eagle Coop
Deerfield Farm Service
Ray Carroll Grain
ADM CountryMark
ADM
Bunge
ADM
MFA Grain
Two Rivers FS
Champaign Landmark
USDA-AMS
Reiff Grain
Zeeland Farm Service
Cargill
Cargill
ADM
Andersons Grain
Cenex Harvest States
ADM
ADM
Maplehurst Farms
Cargill
Bunge
Bunge
Kokomo Grain
Cargill
Ag Pride FS
Lowes Pellets
Stonington Coop Grain
Bunge
Bunge
Ludlow Coop
Cargill
ADM
USDA-AMS
ADM
USDA-AMS
USDA-AMS
USDA-AMS
October Soybean Basis: 2007 vs. 5 year Average
Iowa
October 5 Year Ave
October 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
19
October Soybean Basis: 2007 vs. 10 year Average
Iowa
October 10 Year Ave
October 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
20
February Soybean Basis: 2007 vs. 5 year Average
Iowa
February - 5 Year Ave
February 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
21
June Soybean Basis: 2007 vs. 5 year Average
Iowa
June 5 Year Ave
June 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
22
Specific Sites Selected for Basis Data
Analysis in Iowa









Ashton
IA
United Farmers Coop
Cedar Rapids IA
Cargill
Davenport IA
Cenex Harvest States
Des Moines IA
ADM
Dunlap
IA
United Western Coop
Fairfield
IA
Reiff Grain
Livermore IA
Gold Eagle Coop
Nashua
IA
Five Star Farmers Coop
November average basis ranged from 39 cents under at
Davenport to -101 at Nashua, a 62 cent range
23
October Soybean Basis: 2007 vs. 5 year Average
Illinois
October 5 Year Ave
October 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
24
February Soybean Basis: 2007 vs. 5 year Average
Illinois
February - 5 Year Ave
February 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
25
June Soybean Basis: 2007 vs. 5 year Average
Illinois
June 5 Year Ave
June 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
26
Specific Sites Selected for Basis Data
Analysis in Illinois








Bloomington IL
Cargill
Hennepin IL
ADM
Nashville IL
Ag Pride FS
Paxton
IL
Ludlow Coop
Rochelle IL
Maplehurst Farms
Rushville IL
Two Rivers FS
Stonington IL
Stonington Coop Grain
October basis ranged from -30 at Bloomington to -74 cents at
Rushville, a 44 cent range.
27
October Soybean Basis: 2007 vs. 5 year Average
Indiana
October 5 Year Ave
October 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
28
February Soybean Basis: 2007 vs. 5 year Average
Indiana
February - 5 Year Ave
February 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
29
June Soybean Basis: 2007 vs. 5 year Average
Indiana
June 5 Year Ave
June 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
30
Specific Sites Selected for Basis Data
Analysis in Indiana







Decatur
IN
Bunge
Evansville IN
ADM
Greensburg IN
Lowes Pellets
Kokomo
IN
Kokomo Grain
Linden
IN
Cargill
Portage
IN
Cargill
In October, basis ranged from -30 in Evansville to -60 in Linden a
30 cent range. In November, the range was 47 cents.
31
October Soybean Basis: 2007 vs. 5 year Average
Nebraska
October 2007
October 5 Year Ave
Source: Cash Grain Bids Inc for Market Solutions LLC
32
February Soybean Basis: 2007 vs. 5 year Average
Nebraska
February 2007
February - 5 Year Ave
Source: Cash Grain Bids Inc for Market Solutions LLC
33
June Soybean Basis: 2007 vs. 5 year Average
Nebraska
June 2007
June 5 Year Average
Source: Cash Grain Bids Inc for Market Solutions LLC
34
Specific Sites Selected for Basis Data
Analysis in Nebraska




Bellwood
NE
Frontier Coop
Gothenburg NE
Farmland Service Coop
Lincoln
NE
ADM
In October, basis ranged from -84 in Lincoln to -122 in Bellwood,
a 38 cent range.
35
October Soybean Basis: 2007 vs. 5 year Average
North Dakota
October 5 Year Ave
October 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
36
February Soybean Basis: 2007 vs. 5 year Average
North Dakota
February - 5 Year Ave
February 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
37
June Soybean Basis: 2007 vs. 5 year Average
North Dakota
June 5 Year Ave
June 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
38
Specific Sites Selected for Basis Data
Analysis in North Dakota
 Finley ND
Finley Farmers Grain
 In October, basis averaged -131 to this shuttle facility. Others in
North Dakota report even wider basis.
39
October Soybean Basis: 2007 vs. 5 year Average
Ohio
October 5 Year Ave
October 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
40
February Soybean Basis: 2007 vs. 5 year Average
Ohio
February - 5 Year Ave
February 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
41
June Soybean Basis: 2007 vs. 5 year Average
Ohio
June 5 Year Ave
June 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
42
Specific Sites Selected for Basis Data
Analysis in Ohio






Circleville OH
Cargill
Deerfield
OH
Deerfield Farm Service
DeGraff
OH
Champaign Landmark
Marion
OH
Bunge
Maumee
OH
Andersons Grain
October basis ranged from -57 at Marion to -95 cents at
Deerfield, a 37 cent spread. In November, the range was 48
cents.
43
October Soybean Basis: 2007 vs. 5 year Average
South Dakota
October 5 Year Ave
October 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
44
February Soybean Basis: 2007 vs. 5 year Average
South Dakota
February - 5 Year Ave
February 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
45
June Soybean Basis: 2007 vs. 5 year Average
South Dakota
June 5 Year Ave
June 2007
Source: Cash Grain Bids Inc for Market Solutions LLC
46
Specific Sites Selected for Basis Data
Analysis in South Dakota




Aberdeen SD
South Dakota Wheat Growers
Gregory
SD
Gregory Farmers
Volga
SD
South Dakota Soybean Processors
In October, basis ranged from -110 in Volga to -150 in Gregory, a
40 cent range and among the lowest prices received.
47
Basis Data for Other States
 In Missouri, among locations analyzed there was a 56 cent
spread in basis during October, from -22 in St. Louis to -88 in
Hardin. The spread in November was 81 cents.
 In Kansas, October average basis ranged from -42 cents in
Emporia to -103 in Larned, a 61 cent spread.
 In Minnesota, October average basis ranged from -78 cents in
Mankato to -119 in Brandon, a 41 cent spread, which increased
to 49 cents in November.
 In Wisconsin, average October basis ranged from -100 in
Cambria to -112 in Durand.
 Data for a number of other locations have been assembled for
analysis.
48
Next Steps
 The graphical analysis shows clearly that soybean basis is
widening, so that farmers are getting less of the Chicago futures
price than they used to.
 Results show this to be a widespread problem, and one that is
consistent throughout the year.
 The next step is to try to explain more of the reasons for the
overall widening of basis levels, and differences among locations.
 The planned next steps will involve some preliminary quantitative
analysis of the basis data that have been developed, together with
additional information about transportation and other factors that
help to explain variability in basis at and among specific locations.
 The analysis can be enriched through interviews with
management of some of the specific locations being studied.
49
Thank You!!!
Mark D. Newman, President
Market Solutions LLC
4306 Leland Street, Suite 101
Chevy Chase, MD 20815 USA
Phone: (301) 654-2949
Fax:
(301) 654-4742
E-mail: [email protected]
On the web: www.marketsolutionsllc.com
50