Basis Changes Impact Grain Marketing Results

On any given day, farm operators and others can get grain price quotes from the CME Group, also known as the Chicago Board of Trade (CBOT), in “real-time” on their computer or I-phone. Almost as quickly, they can get current and future corn and soybean market price quotes from local grain elevators, ethanol plants, and processing plants. The difference between the local grain price and the CBOT price is known as “basis”. Understanding how basis works and the seasonal trends associated with basis can be an important factor in making corn and soybean marketing decisions.
• Contract month --- Local harvest price quotes for corn and soybeans would correspond to the December CBOT corn futures price and the November CBOT soybean futures price. By comparison, storing the corn or soybeans after harvest and selling the grain via a forward contract in June or early July the following. More specifically, “basis” is the difference between the local grain price quote on a specific date and the CBOT price for the corresponding futures Summer would have the basis level determined by the July CBOT corn or soybean futures.
A “narrow” or “tighter” basis means that the local corn or soybean price is nearer or getting closer to the corresponding CBOT price, while a “wide” or “widening” basis reflects local grain prices that have a greater margin below the CBOT prices. In most instances, farmers in the Upper Midwest deal with “negative” basis levels, which means than local corn and soybean prices are lower than the corresponding CBOT prices. Areas near the Mississippi River ports or in the Southern U.S more typically have “positive” basis levels, where local grain prices are actually higher than CBOT prices. However, there were several areas of the Upper Midwest that had “positive” basis levels for corn and soybeans at certain times from 2021 until 2023.
While the definition of basis may seem quite simple, having a good understanding of basis can be quite complex. Basis can be highly variable at different locations in a region on any given day and can vary throughout the year, or suddenly be adjusted due to changing dynamics in grain market fundamentals. Following are the main factors that affect basis and can lead to changes in basis levels:
· Geographic Variations--- Corn and soybean basis can vary greatly from location-to-location, largely dependent on the amount of the local grain production to be used as livestock feed or for use in processing and ethanol production. Therefore, basis levels tend to be wider in Western Minnesota and the Dakota’s than in Southern Minnesota and Iowa, which have a high amount of livestock production, as well as several ethanol plants and soybean processing plants.
· Transportation Costs --- This is the cost of shipping grain from the point of local sale to the final destination point, whether it be for use within the U.S. or transported to the ports to be shipped for exports to other countries. For example, areas that utilize a large percentage of the corn and soybean production in the local area have less grain to be transported to the ports or to other portions of the U.S. In addition, being closer to the Mississippi River, an important port, or a major rail line tends to reduce transportation costs and result in tighter basis levels.
· Supply and Demand --- The overall U.S. grain supply, based on crop production in a given year and grain carryover levels from the previous year, along with the grain usage for livestock feed, processing, ethanol production, and exports, can result in year-to-year variations in basis levels. For example, the 2021 and 2022 corn and soybean basis levels in many areas were tighter than normal due to the strong demand for exports to China and increased domestic demand for livestock feed and processing. However, the increases in and corn and soybean acreage and higher yields, along with uneven domestic demand and export levels, has resulted in basis levels widening to more typical “harvest-time” levels in 2024 and 2025. Poor crop yields or strong demand in a local area can also affect the local basis level in a given year.
· Storage and Interest Costs --- In a normal year, both CBOT corn and soybean futures prices and cash prices tend to be the lowest at harvest time and then increase by the summer months in the following year. As the time gets closer to the actual date of delivery for the grain, the storage and interest costs typically decrease, and the basis tends to narrow; however, this does not always occur. At any time during the year, depending on local demand, cash grain prices may be relatively strong compared to the CBOT prices, which may result in tighter basis levels. This was the case in 2021 and 2022, when a combination of lower-than-average crop yields, together with strong demand for corn and soybeans, kept basis levels fairly tight throughout the year in many portions of the Upper Midwest. However, this scenario has been much different for most of 2024 and 2025 when the U.S. has had larger supplies of corn and soybeans.
There are many grain marketing tools available for farm operators to utilize in addition to cash sales, including a variety of hedging, options, and basis contracts. Generally, a hedging or options contract locks in the CBOT futures price, but not the cash price, meaning that the farmer still has basis risk. For example, a “hedge-to-arrive” contract locks in a CBOT futures price but does not finalize the basis until the futures contract is cleared and the grain is actually delivered and sold at the local level. By comparison, a “basis contract” locks in the basis but keeps the final price open depending on changes in the corresponding CBOT futures price at the time of delivery or when setting the final price.
The current 2025 basis levels for corn and soybeans in Southern Minnesota have been quite wide in recent months and are more typical of “harvest-time” basis levels that existed prior to 2021 and 2022. Recent 2025 harvest basis levels for corn in much of the Upper Midwest ranged from about $30 to $.60 per bushel under the CBOT December corn futures price, with basis levels in much of North & South Dakota and Northwest Minnesota exceeding $.70 per bushel. Soybean basis levels ranged from about $.40 to $.70 per bushel under the CBOT price in much of Iowa, Southern Minnesota and Wisconsin, eastern South Dakota and eastern Nebraska. Fall harvest basis levels are $.75 per higher at many locations in the balance of South Dakota and Nebraska, the northern half of Minnesota and Wisconsin, and all of North Dakota. Basis levels are slightly tighter near corn and soybean processing plants in some areas.
The wider “harvest-time” basis levels for corn and soybeans during harvest season in the past couple of years is certainly something to factor into post-harvest grain marketing decisions in the next few months. If corn and soybean futures prices rally after harvest season and basis levels remain quite wide, it will likely encourage the use of more “hedge-to-arrive” contracts for the summer months of 2026. This will allow producers to reduce their “price risk” on the stored grain, while still being able to take advantage of potential basis improvement that may occur between the post-harvest months and the Summer of 2026. On the other hand, if localized basis levels tighten for a short-term period of time after harvest due to disappointing 2025 crop yields and strong local demand, it may be a time to use a “basis contract” to lock-in the basis level. This will allow a producer to take advantage of the tighter basis levels and still have some upside potential in the corn or soybean market into next Spring.
Most grain marketing strategies, including storing unpriced grain in a bin on the farm, involve some level of price and/or basis risk. Understanding the dynamics of basis in corn and soybean market prices is a key element in analyzing the various types of grain marketing contracts that are available to farm operators. Many grain marketing advisors do a very good job of explaining the dynamics of basis and how that interacts with grain marketing strategies. Iowa State University has some good information available on understanding basis and explaining various grain marketing strategies. This information is available on the “Ag Decision Maker” website at: https://www.extension.iastate.edu/agdm/cdmarkets.html.
For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions Group Phone --- (507) 381-7960; E-mail --- [email protected]