Soybean Cash Discounts Widen in Iowa as Farmers Boost Sales

April 14 (Bloomberg) -- Cash bids for soybeans at grain depots and processing plants west of the Mississippi River widened their discount to Chicago Board of Trade futures as farmers increased sales of supplies left from the 2008 harvest.

Cash-basis bids in Iowa, the largest soybean-growing state, fell as much as 3 cents a bushel relative to May CBOT futures, said Troy Lust, a commercial grain broker for FCStone Group Inc. The spot bid in Des Moines was 27 cents a bushel below May futures compared with a 25-cent discount yesterday, he said.

“Soybeans sales were five times that of corn today and the most in several weeks,” Lust said by telephone from West Des Moines, Iowa. Cash bids topped $10 a bushel in some locations, leading to “increased movement” of supplies from farm silos to commercial grain companies, Lust said.

At export terminals in the Gulf of Mexico, bids for soybeans were little changed relative to Chicago futures. The so-called spot-basis bid, or premium, for soybeans delivered by barge this month traded at 52 cents a bushel over the May contract, unchanged from yesterday, Lust said. Bids for delivery of the oilseed next month rose to 54 cents to 58 cents over May futures from 54 cents to 55 cents yesterday, the U.S. Department of Agriculture said in a report.

The cost of moving grain along the upper Illinois River to New Orleans rose to 265 percent of the 1976 published tariff rates, compared with 250 percent at the end of last week, Lust said. That would increase the cost by about 2 cents a bushel to transport grain and was reflected in weaker cash bids, he said.

Barge Demand

“There is an increase in demand for northbound barges” carrying fertilizer for spring planting, rather than barges to make the southbound journey to export terminals, Lust said. The higher freight cost was reflected in lower cash bids, he said.

Soybean futures for May delivery rose 14.5 cents, or 1.4 percent, to $10.36 a bushel on the CBOT, after earlier touching $10.435, the highest since Jan. 12. Prices rose on signs of increased exports as U.S. inventories head for the lowest level in five years.

Exports have climbed as a drought cut output in Brazil and Argentina, the biggest shippers after the U.S. Last week, the USDA said global production will be 2 percent less than it forecast in March, citing smaller South American crops. The USDA estimated U.S. stockpiles on Aug. 31 will be 165 million bushels, down 20 percent from a year earlier.

Export Forecast

U.S. exports will reach a record 32.9 million tons, up from 32.25 million projected in March, the USDA said on April 9. That compares with 31.6 million shipped in the previous year.

The premium for May futures over the July contract fell to 5.5 cents, down 0.25 cent from yesterday’s 5.75 cents, the highest for this marketing year.

“The market is trying to solve a tightening supply problem,” Lust said. “Cash values along the river system are about 4 to 5 cents above delivery,” reducing the incentive for commercial grain companies to make delivery against May futures later this month, Lust said.