1. Chicago Board of Trade Market News
Outlook: USDA’s May WASDE report was expected to be mostly bearish, and while it cannot be called bullish for corn it was less bearish than expected. The result was a 3.2 percent price spike on Tuesday. USDA projects the 2016/17 corn carryout to be 350 million bushels larger than last year’s, but that turned out to be over 100 million bushels less than expected. And while world corn production this year will be substantially larger than last year, so will corn use, leaving ending stocks roughly the same. That said, it is still a 2.2-billion-bushel carryout and the burden remains on the bulls. One demand trigger that could get pulled is the fact that U.S. corn at the gulf is notably cheaper than at the ports in Brazil.
The futures market is experiencing large volumes and large open interest. Attention will now shift toward spring planting and the accompanying weather outlook.
U.S. corn remains competitive on the spot market. Both farmers and exporters are taking a beating in Argentina as weather delayed harvesting and thus delivery is imposing increased demurrage costs and late delivery penalties. Black Sea feed wheat is attracting feed interest, as is the HRW cash market. Wheat will grow more competitive for feed as the weeks go by.
3. U.S. Weather/Crop Progress
U.S. Drought Monitor Weather Forecast: Over the next 5-7 days, the Plains, Midwest, and Northeast remain in a very active weather pattern; the greatest precipitation amounts are projected from northeast Texas into southern Missouri, where up to 5 inches of rain is forecast. With this active pattern, a shot of cold air out of Canada will impact temperatures all the way into the south, with below-normal temperatures. Temperatures are expected to be coolest over the central Plains with departures of up to 15 degrees below normal.
The 6-10 day outlooks show that the best chances for above-normal temperatures are in the southern United States from Texas to the Carolinas. Projections show that the below-normal temperatures could be experienced over the Pacific Northwest, Midwest, and New England. A wetter than normal pattern looks to be likely as there are above-normal chances for precipitation above normal over areas from the Pacific Northwest, Central Plains, and most of the eastern United States. The greatest chances of above-normal precipitation are expected over the lower Mississippi River Valley and the Great Basin.
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 1,105,300 MT for 2015/2016 were up 44 percent from the previous week, but down 16 percent from the prior 4-week average. Increases were reported for unknown destinations (257,900 MT), Japan (238,300 MT, including 58,000 MT switched from unknown destinations and decreases of 5,900 MT), Israel (132,000 MT), Mexico (117,200 MT), Taiwan (74,000 MT, including 65,000 MT switched from unknown destinations and decreases of 1,000 MT), Peru (55,300 MT, including 35,000 MT switched from unknown destinations and decreases of 800 MT), and Egypt (53,000 MT). Reductions were reported for Cuba (7,600 MT) and Nicaragua (1,300 MT). For 2016/2017, net sales of 150,400 MT were reported for unknown destinations (91,200 MT), Mexico (43,700 MT), Costa Rica (13,200 MT), Japan (1,300 MT), and Taiwan (1,000 MT). Exports of 1,141,600 MT were down 7 percent from the previous week and 1 percent from the prior 4-week average. The primary destinations were Mexico (263,700 MT), Japan (227,600 MT), Colombia (166,800 MT), Algeria (94,300 MT), Taiwan (75,600 MT), South Korea (55,100 MT), and Peru (54,300 MT).
Optional Origin Sales: For 2015/2016, the current optional origin outstanding sales balance totals 392,000 MT, all unknown destinations.
Barley: Net sales of 500 MT for 2015/2016 were reported for Taiwan. Exports of 800 MT were reported to South Korea (500 MT) and Japan (300 MT).
Sorghum: Net sales of 132,000 MT for 2015/2016 were down 27 percent from the previous week, but up 66 percent from the prior 4-week average. Increases reported for China (165,100 MT, including 49,600 MT switched from unknown destinations), Colombia (15,000 MT), Mexico (3,900 MT), and Japan (3,000 MT), were partially offset by reductions for unknown destinations (55,000 MT). Exports of 63,000 MT were down 73 percent from the previous week and 61 percent from prior 4-week average. The destinations were China (49,600 MT), Mexico (13,300 MT), and South Korea (100 MT).
6. Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: While some buyers may be holding off – hoping that DDGS will trend lower after its recent run-up – the rally in soybeans may have the opposite effect. The soybean/corn price ratio is now at 2.75:1, which is well above the level at which farmers would decide to switch some acres away from corn and into additional soybean production. Additionally, excess moisture in the eastern corn belt may prompt even more shifting away from corn production and towards soybeans since they can be planted later after the fields have been able to dry.
Indications are that China is back buying, having seen the run-up in soymeal and needing protein for inclusion in hog rations. Indeed, DDGS prices continued their climb upward this past week only this time the bigger increases were at the U.S. Gulf. Still, there were notable increases to every delivery point and in each of the near-term delivery months. Prices for 40-foot containers of DDGS delivered near-term to Southeast Asia were up 8.5 percent this past week and up 6.8 percent for delivery to Shanghai.
Ethanol Comments: The Energy Information Administration (EIA) called weekly ethanol production 39,000 barrels per day higher, likely due to plants coming back on line after maintenance. However, stocks dropped 900,000 barrels during the week from 22.2 million to 21.3 million. Current estimated stocks remain above last year’s level.
The margin between the corn price and the value of ethanol and coproducts was down in all four of the key markets from a week ago (see below).
- Illinois differential is $1.44 per bushel, in comparison to $1.57 the prior week and $2.59 a year ago.
- Iowa differential is $1.54 per bushel, in comparison to $1.64 the prior week and $2.30 a year ago.
- Nebraska differential is $1.72 per bushel, in comparison to $1.76 the prior week and $2.18 a year ago.
- South Dakota differential is $1.74 per bushel, in comparison to $2.02 the prior week and $2.40 a year ago.
7. Country News
Canada: The country’s wheat stocks may be the lowest in a decade but barley stocks were at 3.81 MMT, up 12 percent from a year ago. (Stats Canada)
India: Even after paying the import duty, GMO plant proteins would be cheaper than buying domestic feed – but the technology remains blocked. (WPI)
Kenya: Field trials with GMO maize are starting in Kenya with commercialization expected in 2018. (Reuters)
Malawi: The country now has more flexible fuel vehicles and a commitment to using ethanol in lieu of gasoline. (Africanews)
Russia: Corn production for 2016 is estimated at 13.5 MMT, 2.2 percent more than last year and possibly a record. Area planted increased by 2.9 million hectares and yields are expected at 2.45 MT/Ha. (WPI)
South Africa: Maize yields during South Africa’s last major drought year (1991/92) averaged 0.85 MT/Ha. Yields during this year’s major drought have averaged 3.72 MT/Ha. Although not explanatory of the complete difference, a major change has been the adoption of GM varieties. (WPI)
9. Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: The past freight rally is certainly over and we are back to a Dry-Bulk (and container) market that is struggling. The Baltic indices are bouncing around a little but the physical markets are not really moving much. It is feeling like a stare-off game where buyers and sellers are trying to see who blinks first. The slight improvement in reported rates are more of an adjustment than any real upward movement in the overall rate structure.
Q1 financial reports are being published by shipping companies and the results are understandably not good.
There is an abundance of underutilized grain export capacity sitting in the U.S. Gulf and PNW.
The charts below represent year-to-date 2016 versus January-December 2015 annual totals for container shipments to Thailand.