Factors Influencing the Gulf and Pacific Northwest (PNW) Soybean Export Basis: An Exploratory Statistical Analysis

Growth in the export marketing of soybeans has drawn attention to the basis volatility in these market channels. Indeed, there has been greater growth in soybean exports compared to other commodities and this is due in part to the growth of exports to China. Concurrently, there has been substantial volatility in the basis at the primary U.S. export locations: the U.S. Gulf and the Pacific Northwest (PNW). The purpose of this study is to examine the impact of supply/demand, export competition and logistical variables on both the average level and seasonality (analog year) of U.S. export basis values for the 2004/05 through 2015/16 marketing years (September through August for U.S. soybeans). The results indicate that the average market year level of the basis is primarily influenced by export competition from Brazil and export demand – particularly from China; however, domestic demand (soybean crush) also has some influence. Rail transportation costs to both the Gulf and PNW have an influence on the basis level; however, barge and ocean freight rates appear to not have a significant influence on the level of the basis. Application of agglomerative hierarchal clustering resulted in the identification of 5 and 4 distinct analogs (over the 12 marketing years in the dataset) for the Gulf and PNW respectively. Application of the two-sample mean difference tests (Lebart, Morineau and Piron 2000) to the analogs indicate that the seasonal analog of the export basis is more heavily influenced by internal logistical conditions (late railcar placement and secondary railcar values), pace of farmer marketings, transportation cost differentials (between ports), and individual port export activity (ships in port and export inspections) rather than international and domestic demand.