US logistics improve, but tight elevation supports FOB corn values

The slew of logistic issues that dogged US exports are easing, bringing relief to CIF corn values in key export hubs, but tight elevation capacity is ensuring that FOB values remain well supported, market sources told Agricensus on Friday.

"Elevations [costs] are huge… old crop margins are 30-40 cents per bushel while new crop is 25 cents per bushel – there’s less capacity remaining for old crop, more capacity available for new crop," one market source explained.

That has driven a wedge between CIF costs – typically the cost of transporting the grain from the production region to the export hub – and FOB prices, which reflect cargoes destined for export.

CIF corn offers for March and April deliveries were heard offered at 45 and 48 cents over the front month contract Friday, while these stood at 72 and 64 cents, respectively, on March 8, according to market sources.

FOB basis prices differentials over the same period have held relatively firm, however, with the Agricensus FOB US Gulf basis falling from 91 cents over the front month corn contract, to 84 cents on Thursday – down 7 cents over the past two weeks.

In terms of soybean, those elevation costs - the difference between CIF and FOB - are currently valued at around 27 cents for May, falling to 20 cents for June.

While the same effect can be seen in the Pacific Northwest, the infrastructure of barge and river movements means it is particularly felt in the US Gulf.

"When capacity is tight, the Gulf will typically outpace the PNW in elevation margins," the source said, as the larger volumes moved by rail mean better efficiencies and lower handling costs in the PNW.

The divergent prices between CIF and FOB values is not a new phenomenon, as recent logistical issues have also seen values pushed apart.

Bad weather brought rail delays to the Western Plains, slowing the transit of corn from the Midwest to the Pacific Northwest and starving the CIF delivered market of regular supply.

Alongside that, cold weather, swollen rivers and ice flows also saw key river arteries running down into the US Gulf restricted, leaving FOB cargoes incurring extra costs from demurrage.