2011 Market Perspectives

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CHICAGO BOARD OF TRADE MARKET NEWS


Week_In_Review

 

Outlook: The very short-term outlook is for USDA to start off next week by releasing its latest yield estimates on Monday morning at 8:30 A.M. Eastern Standard Time. The average guess of market analysts is that USDA will estimate a corn yield of 148.8 bushels per acre. Currently, corn prices seem to already be pricing on the prospect of an average 148 bushels per acre yield. Whatever the report says, there will be some price reaction to updated supply projections. Long-term, the market’s attention will turn increasing toward demand.

U.S. corn exporters are supposedly complaining about the apparent lack of demand. However, there is no reason for global buyers to purchase aggressively prior to harvest. Market participants will watch to see if international buyers return after harvest applies some pressure to price, or if they will make a firm statement by remaining out of the market.

Remaining out of the market is a possibility, and there is some discussion that China is already gearing up to significantly increase its use of feed wheat.  It will take several months to determine how many backs have been turned toward high-priced American corn. The current corn crop is only about 20 percent mature. So, export demand questions will be answered in the mid-term. In the longer-term, the outlook is for exchange rates, inflation and transportation costs to become increasingly important variables.

 

CBOT DECEMBER CORN FUTURES


 

CBOTDecCornFutures

Current Market Values:

DDGSPriceTable

U.S. WEATHER/CROP PROGRESS


Crop_Condition

U.S. Drought Monitor Weather Forecast: The next 5 days (through September 11) are calling for a pretty quiet week across most of the West in what has been a relatively quiet monsoon season two-thirds of the way in. Another disturbance in the Bay of Campeche in the southwestern Gulf of Mexico seems to be revving up and could press northward over the coming days bringing a chance for more relief to the southeast as a potential tropical storm. It is too early to tell exactly where. Florida, the upper Midwest and the Northeast are also good candidates for ample precipitation during this period. Temperatures are expected to be slightly below-normal (1-3 degrees) for the entire southern half of the country with the northern third expected to see readings 3-9 degrees above normal.

The CPC 6-10 day forecast (September 13-17) is calling for better chances of above-normal temperatures across the western half of the United States. Parts of the Southeast (AL, MS), Ohio Valley (TN, KY, IN, OH) and eastern Great Lakes regions are expected to be below-normal. As for precipitation, the eastern seaboard from Florida to Maine could see above-normal rainfall as can the Intermountain West and Great Basin. Below-normal amounts are still likely across Texas and southern Oklahoma, along with the Pacific Northwest, and across the northern tier states from Montana to Minnesota. Follow this link to view current U.S. and international weather patterns and the future outlook: Weather and Crop Bulletin

 

U.S. EXPORT STATISTICS


 

Export_Sale_sAndExports

Corn: Net sales of 820,600 MT for the 2011/2012 marketing year (which began September 1) were primarily for Mexico (313,800 MT), Japan (126,800 MT), the Dominican Republic (107,800 MT), Costa Rica (82,800 MT), South Korea (72,200 MT) and unknown destinations (52,100 MT). Decreases were reported for Colombia (33,700 MT). Net Sales of 50,000 MT for delivery in 2012/2013 were reported for Japan. A total of 2,795,700 MT in sales were outstanding on August 31 (the end of the 2010/2011 marketing year) and carried over to the 2011/12 marketing year. Exports of 687,200 MT were reported for August 26-31. The primary destinations were Japan (145,100 MT), Mexico (83,800 MT), Egypt (80,000 MT) and South Korea (57,000 MT). Accumulated exports for the 2010/11 marketing year were 45,256,400 MT, down 6 percent from the prior year’s total of 48,345,400 MT. Exports for September 1 of 136,000 MT were mainly for South Korea (71,200 MT), Mexico (25,600 MT), Costa Rica (23,700 MT), and Jamaica (11,800 MT).

Barley: There were no sales reported during the week.

Sorghum: Net sales reductions of 6,800 MT for the 2011/2012 marketing year (which began September 1) resulted as increases for Japan (8,300 MT, switched from unknown destinations), were partially offset by decreases for unknown destinations (8,300 MT) and Mexico (6,900 MT). A total of 172,600 MT were outstanding on August 31 (the end of the 2010/2011 marketing year) and carried over to the 2011/2012 marketing year. Exports of 48,200 MT were reported for August 26-31. The destinations were Mexico (40,400 MT) and Japan (7,800 MT). Accumulated exports for the 2010/11 marketing year totaled 3,334,900 MT, down 3 percent from the prior year’s total of 3,244,400 MT. Exports of 8,900 MT for September 1 were to Japan (8,300 MT) and Mexico (600 MT).

 

 

Grain_InspectionsForExports

 

FOB


Yellow_CornFOB

White_CornFOB

SorghumFOB

CornGlutenFOBBarleyFOB

 

 

 

DDGS_PriceTable

 

DISTILLERS DRIED GRAINS WITH SOLUBLES (DDGS)


 

General Comments:

Chicago market prices have allowed buyers to rethink their intentions and allowed many to close on nearby positions. Healthy volumes were traded this week to most destinations.

We still see some anxiety on the next crop report and how that may affect price and availability. There were no changes on domestic usage as industry demand remains solid, allowing for a comfortable cushion for proper price bench marks.

Mexico and China demand is still strong. Consumers do not want to be caught short as new crop approaches and prices don’t seem to allow a break, despite nearby harvest expectations.

Comments and Trades reported:

Local trade:

1,200 ton Cal - $259/short

1,000 ton Cal - $263/short

1,000 ton Washington - $252/short

China

Huangpu: $299 for 2,000MT / $297 for 2,000MT

Qingdao: $294 for 1,000MT

 

Korea

Busan: $295 for 6,000MT / $296 for 1,000MT

Incheon: $312 for 1,000MT

 

Ethanol Comments:

President Obama spoke before Congress last night and some of his comments were appreciated by individuals from the ethanol industry. The President commented positively about building advanced biofuels. Ethanol proponents are supportive of Federal programs that stimulate the biofuel industry with incentives and gets people back to work. Sosland Publishing reported thousands of individuals in 29 states have already benefited from Federal ethanol policies. Due to Federal support, the U.S. biofuel industry has remained strong in spite of a weak economy and U.S. ethanol exports are setting new records.

Some Midwest farmers may be reconsidering their support for Republican front-runner Rick Perry because of his perspective on the ethanol mandate. Corn growers recognize that the 45-cent blenders credit will disappear, but they seem less willing to compromise on the on the ethanol mandate that Texas Governor Perry has publically opposed.

 

COUNTRY NEWS


 

Australia: Yesterday the U.S. Weather Service issued a warning that La Nina weather conditions could strengthen through the rest of the year. La Nina can cause excessive wetness in eastern Australia and drier-than-normal conditions in South America and the central Plaines of the United States.

Brazil: The outlook for Brazil’s corn remains bullish, according to the U.S. Grains Council’s Brazil representative, Alfredo Navarro. He reported that corn prices in central and southern Brazil are higher than in 2008. Those high prices encouraged Brazilian farmers to increase corn acreage the following season and that is likely to occur again.

China: “AGRIA” is the name of a Chinese company that has developed a new variety of corn seed in conjunction with the China National Academy of Agricultural Sciences (CNAAS). They have produced the top varieties in China for the past two years. It could become somewhat of an ironic situation if farmers in the Americas buy seed from Chinese, which they would then grow and sell back to China.

EU: European feed buyers are excited that their corn crop appears excellent. European buyers are hoping that this crop will help insulate them from tight stocks and high global feed grain prices that are the result of current declining U.S. yields.

Japan: Rumors in export markets are that Japanese feed grain buyers are starting to seek alternatives to expensive American corn and pricing wheat for November shipment. Japan has been one of the United States’ most steady corn customers.

Russia/Ukraine: Ukraine may pass Brazil this season to become the world’s third largest corn exporter, behind the United States and Argentina. Ukraine has the natural resources and strategic location to continue growing in size and could obtain the number two position in just a few seasons.

 

OCEAN FREIGHT MARKETS AND SPREADS


Bulk_FreightIndices

 

OCEAN FREIGHT COMMENTS

Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: World freight markets continued to trade in circles this week. The Baltic Dry-Bulk Panamax rates in the Pacific were higher while the Atlantic rates were mostly unchanged. There was talk of stronger iron ore and coal demand early in the week but it weakened by week’s end. Overall, the physical rate structure for grains did not change much and we remain in the same narrow trading range that has existed for the past six months.

In that, it is another Friday; freight market news wires are stating that the market feels a little toppy and may be running out of steam. This is the same comment that has been made at the end of most weeks. The point is, the market does not possess the fundamentals to stage more than a temporary small rally. So for the foreseeable time, it appears that we will continue to steam in circles. I’m leaving most rates unchanged this week.

 

Baltic_Panamax

Below is a recent history of freight values for Capesize vessels of iron ore from Western Australia to China:

Capesize_Vessels

US_AsiaMarketSpreads

 

The charts below represents total (MT) month-to-month hong Kong container shipments for Jan-Aug 2009, Jan-Aug 2010, and Jan-Aug 2011.

2009HongKong

2010HongKong

2011HongKong

 

 

INTEREST RATES

 


 

Interest_Rates

 

 

 

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