Surging high or record low, Mississippi River levels weigh down soybean basis
“While we witnessed the association of record-low basis with record-low river levels in the lower Mississippi River last fall, we are now witnessing an association of relatively lower basis and record-high river levels in the upper Mississippi River due primarily to snow melt,” Biram said.
By Mary Hightower
U of A System Division of Agriculture
May 5, 2023
Fast facts
- Melting snowpack sending Mississippi River levels higher
- 71 river gauges reported minor to major flooding on Friday
(566 words)
(Newsrooms: with art of Biram, graph showing basis/river gauge activity; screenshot of river gauges from NOAA.)
LITTLE ROCK — Soybean growers might want to take a wait-and-see approach to contracting this spring until the Mississippi River is done carrying melted snowpack downstream, said Hunter Biram, extension economist with the University of Arkansas System Division of Agriculture.
Last October, the Mississippi River dropped to a record low, with barge traffic being halted at one point south of Memphis, Tennessee. With no barge movement, newly harvested grain piled up at the elevators.
“Grain and oilseed producers in the Mid-South experienced record low soybean basis due to reduced barge traffic and record high barge freight rates along the lower Mississippi River,” he said.
Basis is defined as the price difference between the futures price and the cash price of the commodity.
“Grain buyers at local elevators were nudged to bid lower cash prices for soybeans to compensate for the additional cost to transport the grain from the elevator to the port of New Orleans for export,” Biram said. “Further, grain buyers essentially had no place to put the grain even if they wanted to buy it which supports the principle of offering lower cash prices to disincentivize farmers from making delivery.”
Levels swinging the other way
Record levels of snow fell in the north in recent weeks. Duluth, Minnesota, saw 140 inches of snow as of April 30, breaking a three-decade-old record. Minneapolis/St. Paul recorded 89.7 inches, its third-highest snowfall. Bayfield, Wisconsin, on the shore of Lake Superior, saw 182.9 inches of snow as of Tuesday.
All that snow has to go somewhere and a lot of it drains into the Mississippi River. On Friday, between St. Paul, Minnesota, and St. Louis, 11 Mississippi River gauges showed major flooding; 16 had moderate flooding and 44 gauges showed minor flooding. High levels can limit barge traffic as “locks and dams are closed preventing the transportation of grain downriver or empty barges upriver,” Biram said.
“While we witnessed the association of record-low basis with record-low river levels in the lower Mississippi River last fall, we are now witnessing an association of relatively lower basis and record-high river levels in the upper Mississippi River due primarily to snow melt,” Biram said.
Biram said that on April 10, soybean basis across the lower Mississippi River “began to diverge from historical trends.”
Using Elaine, Arkansas, as an example, Biram said the basis fell to 18 cents over, down from 25 cents over, “which suggests a local response to the rising upper Mississippi levels.
“This weakening of basis is associated with the increase in river gauge height throughout the month of April,” he said. “The most recent period in which basis fell below zero in April was in 2019 when it consistently stayed near 40 cents under. That was also a period in which the upper Mississippi River experienced record-high levels.”
Good news comes for those who wait
As the river level in the upper Mississippi River falls, “with it will most likely come relatively stronger soybean basis in the Mid-South, if the historical association between these two variables continues,” Biram said. “Additionally, forward cash prices typically reach their strongest in early summer before declining as we approach the harvest months.
"One implication for a grain marketing plan would be to consider holding off on the May forward contracting decision for 2023 harvest-time delivery until the latter part of the month in anticipation of recovery to soybean basis,” he said.
To learn about extension programs in Arkansas, contact your local Cooperative Extension
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About the Division of Agriculture
The University of Arkansas System Division of Agriculture’s mission is to strengthen
agriculture, communities, and families by connecting trusted research to the adoption
of best practices. The Division of Agriculture conducts research and extension work
within the nation’s historic land grant education system through the Agricultural
Experiment Station and the Cooperative Extension Service.
The Division of Agriculture is one of 20 entities within the University of Arkansas
System. It has offices in all 75 counties in Arkansas and faculty on five system campuses.
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is an Affirmative Action/Equal Opportunity Employer.
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Media contact: Mary Hightower
mhightower@uada.edu