Strong export demand that ignited a counter-seasonal rally in crop markets so far this harvest also remains supportive for basis levels.

The river market continues to lead basis improvement, particularly south of St. Louis on the Mississippi, and also on the Illinois River for this winter, according to Aaron Curtis, commodity risk consultant for MID-CO Commodities.

“With increased export demand, there’s a large appetite for grain to move to the Gulf,” Curtis told FarmWeek.

“With the absence of farmer selling as harvest has been slow to get going, basis levels continue to have to do work,” he noted. “They’re pretty well supported for this time of year.”

Crop futures continued to move higher early last week, even as corn and soybean shipments increased at local elevators amid nearly ideal harvest conditions.

December corn approached $3.90, November soybeans surpassed $10.50 and December wheat neared $6 as of Oct. 6.

“This is definitely not customary to see the market continue to rally during harvest,” Curtis said. “We’re still looking at large crops, but things have definitely gotten tighter with U.S. balance sheets.”

That tightening was driven by a huge surge in exports in recent months along with the general expectation of slightly lower yields due to adverse weather during the growing season.

“It really kind of started with the August crop report. Since then the market has been pretty well supported, led by soybeans, as we returned to that old pattern of China buying a lot of U.S. beans the first half of the year,” Curtis said. “The general perception of the market is yields for corn and soybeans will likely get adjusted lower the next couple of months. That offers a general supportive feel as well.”

Analysts will continue to keep their eyes on weather as dryness issues developed in South America, which affected corn and soybean planting there, and in the Black Sea region, which kept the wheat market on edge in recent weeks.

Meanwhile, funds added support with record long positions in the soybean market.

Looking ahead, Curtis doesn’t believe the market rallies will fizzle out any time soon. But it could be a bumpy ride.

“I think volatility will continue to increase as we move through harvest,” he said. “The election will keep the outside markets volatile, we’re watching South American weather and we’ve got a tightening of the U.S. balance sheet.”