1. Chicago Board of Trade Market News
Outlook: Forecasting the market has grown difficult. Corn export sales are in the expected range with some near-term opportunity given that the U.S. is offering the lowest priced product at this time. There are still some global economic uncertainties, though market reactions were calmer than expected following the terrorist attacks in Paris. The strong dollar and an impending interest rate hike remain watchful factors.
Monsanto offered more bullish news to its investors with a prediction that corn prices will recover to $4.50 per bushel during the next eight to 12 months. That would be 14 percent to 34 percent above the corn price range forecast issued by USDA for the marketing year. At the same time that grain markets have been trading in a narrow range, there has been strong downward pressure on cattle.
A major near-term factor could be the presidential election runoff in Argentina this Saturday. Candidate Mauricio Macri has promised to reduce taxes on corn exports and his opponent, Daniel Scioli, has hinted at such a move. Regardless of which candidate wins, some level of devaluation of the peso is expected to follow.
3. U.S. Weather/Crop Progress
U.S. Drought Monitor Weather Forecast: As the current USDM week came to a close, a strong cold front was moving across the Plains towards the Mississippi Valley. Several inches of rain had already fallen from eastern Texas to Mississippi and northward to Missouri and Illinois during the first day of the period for the November 24 USDM. For the upcoming four days (November 19-23), which will fill out the November 24 USDM week, the front and low pressure system will drop one inch or more of precipitation across the Southeast to Mid-Atlantic States and parts of the Great Lakes and Northeast. Two inches or more of rain are predicted for parts of Alabama to the Southern Appalachians. A band of precipitation is forecast from the Upper Mississippi Valley, across the Central Plains and Wyoming, to the Pacific Northwest, with amounts ranging generally from a tenth to half an inch, but locally to an inch or more, especially in western Oregon. No precipitation is predicted for most of California to the Southern Plains, or along the Canadian border from Washington to North Dakota. Temperatures are forecast to be below normal, except for parts of the Southwest, Southeast, and Northeast.
For the ensuing five days (November 24-28), the odds favor below median precipitation in the Pacific Northwest and along the entire East Coast of the CONUS. With a southerly flow out of the Gulf of Mexico, above-median precipitation is expected across the rest of the country, especially across the southern and central Plains to Midwest. Below-normal temperatures are expected across most of the West and into the northern Plains, with above-normal temperatures from New Mexico to the Great Lakes and eastward, except for near-normal temperatures in the Southeast.
Follow this link to view current U.S. and international weather patterns and the future outlook: Weather and Crop Bulletin.
4. U.S. Export Statistics
Corn: Net sales of 779,800 MT for 2015/2016 – a marketing-year high – were up 26 percent from the previous week and 46 percent from the prior 4-week average. Increases were reported for Mexico (233,500 MT), Japan (184,500 MT, including 56,900 MT switched from unknown destinations), unknown destinations (178,700 MT), South Korea (62,000 MT), Peru (46,500 MT), and Guatemala (24,200 MT, including 21,700 MT switched from unknown destinations). Reductions were reported for the French West Indies (6,600 MT). Exports of 389,000 MT were up 44 percent from the previous week, but down 3 percent from the prior 4-week average. The primary destinations were Mexico (119,200 MT), Japan (106,400 MT), Peru (61,000 MT), Guatemala (30,000 MT), Colombia (25,200 MT), and Taiwan (14,700 MT).
Optional Origin Sales: For 2015/2016, outstanding optional origin sales total 395,000 MT, all unknown destinations.
Barley: Net sales reductions of 1,500 MT for 2015/2016 – a marketing-year low – were reported for Israel. Exports of 1,300 MT were reported to Israel (700 MT), South Korea (300 MT), and Japan (300 MT).
Sorghum: Net sales of 404,100 MT for 2015/2016 – a marketing-year high – were up noticeably from the previous week and from the prior 4-week average. Increases were reported for China (346,000 MT, including 117,000 MT switched from unknown destinations and decreases of 5,200 MT), unknown destinations (57,000 MT), and Mexico (1,000 MT). Exports of 272,000 MT were up 62 percent from the previous week and 33 percent from prior 4-week average. The destinations were China (259,400 MT) and Mexico (12,600 MT).
6. Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS merchandisers indicate there is customer interest in January shipments, and some looking to January through March shipments, which may explain some of the current slowness. It is unclear that prices will be any lower then given the narrow trading range for corn presently, indicating a floor, and the notice to investors by Monsanto (see the Outlook section of this report) that even predicts an forthcoming increase in corn prices. All of this may encourage more to begin locking in prices sooner rather than later.
December and January DDGS prices fell slightly this past week versus the week before. The most significant change was a 4.4 percent drop in the cost of a 40 foot container to South Korea (Busan). There was no change in the price of DDGS delivered CIF NOLA by barge, Mid-Bridge Laredo, or for 40 foot containers to Jakarta.
Ethanol Comments: Crude oil futures remain in decline with December dropping below $40/barrel. The slide was triggered by a U.S. Energy Information Administration report that 300,000 barrels of crude had been added to inventory over the past week.
Fuel ethanol stocks were up 2.1 percent (400,000 barrels) from a week earlier, despite production being down 7,000 barrels/day from a week ago. Overall, production per day this past week was up 0.5 percent from a year earlier and stocks are up 11 percent. There were no net imports of ethanol for the past week, compared to 26,000 barrels a week earlier.
The International Energy Agency issued its World Energy Outlook for 2015 and predicted that renewable energy would fulfill more than five percent of transportation fuel demand by 2040, assuming continued government mandates for blending, and that 70 percent of that fuel would be ethanol. The Agency projects investments in biofuel supplies to average $15 billion per year over the period with the bulk concentrated in the U.S., Brazil and EU, and some increase in China and India. Note that this is down from the $27 billion peak reached in 2007, but one-third higher than during the 2010-2013 period.
- Illinois differential is $1.75 per bushel, in comparison to $1.70 the prior week and $3.73 a year ago.
- Iowa differential is $1.49 per bushel, in comparison to $1.47 the prior week and $3.36 a year ago.
- Nebraska differential is $1.71 per bushel, in comparison to $1.71 the prior week and $3.50 a year ago.
- South Dakota differential is $1.73 per bushel, in comparison to $1.67 the prior week and $3.42 a year ago.
7. Country News
Argentina: Traders and farmers may be overly optimistic for their preferred candidate, Mauricio Macri, in this Saturday’s presidential election runoff. The polls were wrong in the first round of voting and they currently show Macri up by only around five points over Daniel Scioli, with 11 percent voters still undecided. (Bloomberg)
Britain: The UK signed a five year agreement to supply China with 750 KMT of malting barley for the growing beer industry. (Reuters)
Iraq: ISIS has geographic control over 40 percent of Iraq’s barley crop, which unlike oil fields, is not easily destroyed by air campaigns. The jihadist group can make hundreds of millions of dollars via its control of agriculture. (Bloomberg)
Ukraine: Feed barley prices increased ($133-146/MT bid) this past week for domestic use and even higher ($154/MT) near ports as exporters gave processors stronger competition for supplies. FOB offers were unchanged. (WPI)
9. Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: And so it continues. Global ocean freight markets are showing no mercy towards vessel owners and continue to weaken and make new lows each week. At this point we do not have much farther to go before things reach the levels of February 2014 (7,721).
I’m not sure what more can be said of this market. Rates are dropping like a rock and vessel owners are in big trouble. The shipbuilding yards in Japan, Korea and China are also feeling the hurt and will be scaling back. This is not a positive picture for the entire shipping industry. Meanwhile, the very low Dry-Bulk rates will continue to put considerable competitive pressure on the percentage of containerized grain exports.
The charts below represent year-to-date 2015 versus January-December 2014 annual totals for container shipments to South Korea.