By ANN HINCH
Assistant Editor

ST. LOUIS, Mo. — For its part, the American Soybean Assoc. (ASA) is trying to determine why the commodities market is so volatile, why futures and cash prices aren’t converging and why price bases are staying so wide.

To this end, it formed the Market Performance Working Group (MPWG) earlier this month.

Steve Wellman, MPWG chairman, said its purpose is to present findings to ASA’s board and make suggestions that the organization can turn into lobbying efforts for regulatory changes if needed, or perhaps simply policy changes within the ASA itself.
Wellman was just one attendee at last week’s Commodity Futures Trading Commission (CFTC) meeting in Washington, D.C. Other groups represented corn, cotton, cattle and other crop and livestock interests, and those of commodities exchanges as well as trading and shipping firms.

“When you get that much diversity in the room, you’re going to get a lot of different opinions” on nonconvergence and volatility causes, Wellman said.

The MPWG will submit a written statement to the CFTC by May 7.
“I’m not going to say we have the answers, but we’re seeing what we can do, how we can help,” Wellman said.

Fellow corn and soybean farmer Ron Kindred of Atlanta, Ill., serves on the MPWG and the Soy Transportation Coalition (STC), formed last year by ASA and eight other soybean organizations. Even the STC is examining basis as it relates to transportation cost – and Kindred pointed out basis varies among regions in the United States.

“It varies from place to place within a region,” he emphasized. “And it varies greatly.”

He hasn’t seen these drastic regional variances before, such as those presented by CFTC officials at last week’s meeting.
For example, one chart showed the soybean basis comparison for the last week of March from 1996 to present. From 1996-2006, grain prices varied by region, but within a short range in each place.
For the past two years, however, prices have dropped outside those ranges – meaning more money offered in the Gulf of Mexico region than in far-flung cities such as Chicago and Toledo. The CFTC’s Dave Kass said barge rates are a big part of those basis differences.

“The closer you are (to an end user), the lower the transportation costs, the higher the basis,” said market analyst Shawn Hackett, adding increased demand on the U.S. from China because of political wrangling in Argentina – its traditional soybean supplier – is helping widen that basis.

“Here in the last year or so, you can have a 15-cent difference between elevators 10-15 miles apart,” Kindred explained.

The STC is doing a study to help determine farmers’ transportation costs and come up with suggestions for trimming them. The groups to which it reports can then go about doing what’s needed to effect policy or regulatory changes if need be.

The group’s focus is on bulk rail transport – one of the chief reasons it was formed. “We don’t see semis (trucks) as being the answer,” Kindred said, adding the STC would also like to see waterways transport modernized and used for more grain.

Decades ago, railroad companies started going broke, he said, and now those lines are needed. Because rail is “an up-and-coming industry” again, he said some of those tracks are finally being upgraded. He pointed out this coast-to-coast transportation has been part of the U.S.’ competitive advantage, and that other continents – such as South American countries – are starting to catch up.

“It’s not going to be a quick process, but long-term, I think we can do some good, and that’s why we formed the coalition and the (MPWG),” Kindred said.