CHICAGO, July 31 (Reuters) - Cash bids for corn and soybeans were recovering across the U.S. Midwest on Wednesday after a historic collapse last week as grain buyers sought to spur sales from razor-thin farmer holdings, grain buyers and analysts said.
Farmer sales of each crop slowed to a halt in the wake of last week's plunge in cash premiums and Chicago Board of Trade futures to multi-month lows. The declines shaved more than $1 off the price of a bushel of corn and $2 off a bushel of soybeans.
Buyers at a large corn processor owned by Cargill Inc in Blair, Nebraska, a week ago were willing to buy corn $1.80 per bushel above futures for about $6.90 per bushel before dropping their bid to just 75 cents above futures, or $5.67, on Friday.
By Wednesday, the bid at that location was lifted to 90 cents above futures, or a cash price of roughly $5.88. Similar price moves were seen at elevators, processors and ethanol plants across the U.S. Corn Belt.
"It's definitely a cat-and-mouse game moving forward," said Scott Docherty, general manager at Topflight Grain Cooperative, which has several grain elevators in central Illinois.
"We saw producers trying to liquidate old-crop because the basis was breaking with the board at the same time. It chased a lot of bushels out of the marketplace and now it's dried up again," Docherty said.
Farmers increased sales of existing supplies last week as largely favorable growing conditions benefited the development for the new crop.
Prices for the old- and new-crop converge each year around harvest. That move was expected to be more pronounced this year after last summer's drought left supplies the smallest in about a decade while big plantings and good weather will likely lead to record harvests beginning around October.
Basis bids for each commodity slowed rose to record levels - with corn bids climbing to as much as $2 per bushel above futures last week - before they quickly came crashing down.
"The basis collapse we had last week was significantly overdone in my opinion and what we are seeing is old-crop basis firming just a little bit," said Karl Setzer, an analyst at the MaxYield Cooperative in West Bend, Iowa.
"The bottom line is that we are coming to the realization that we need grain to move," Setzer added.
At a key processor in Decatur, Illinois, where Archer Daniels Midland Co has its headquarters, buyers reduced their soybean basis from $1.80 above futures to $1.30 above futures before lifting their bid late on Tuesday to $1.50.
Even though bids are increasing, the record-high levels seen earlier this summer were unlikely to return, analysts said. Many buyers are bidding week-to-week and as soon they are confident they have enough supplies bought to last until harvest, they will drop their bid again.
"We were bidding into a vacuum. Now, we're just trying to find a price that will get a good response," said a buyer for Bunge Ltd.