1. Chicago Board of Trade Market News
Outlook: March corn is trading sideways in a comfortable range near $3.50, waiting for tomorrow’s USDA reports. Tomorrow’s reports, however, aren’t expected to produce major changes to the U.S. or world balance sheets. If that is the case, corn will be relegated to continue its slow, sideways trade until U.S. planting prospects are better determined.
USDA’s Export Sales report featured 676,300 MT of gross sales with 889,800 MT of exports. The export volume was nearly double the weekly pace needed to meet USDA’s export projections, but after months of poor export volumes, this was a drop in the bucket. Year-to-date bookings (exports plus unshipped sales) are down 25 percent but exports are off 36 percent. Rising Brazilian corn prices could give U.S. exporters an opportunity, but steady U.S. cash prices do not reflect this dynamic yet.
Ethanol production fell for a second straight week in Wednesday’s EIA report, dropping 3.5 percent from the prior week and coming in under 1,000 million barrels/day for the first time in 12 weeks. Ethanol stocks were steady even as gasoline consumption increased 2 percent. Blender margins remain solid which will continue to support the ethanol markets. Additionally, livestock feeding efficiency will be lower with the cold weather, boosting DDGS demand. Ethanol has been a bright spot for the corn market this year and is likely to continue this role once warmer weather allows production to bounce back.
Tomorrow’s USDA report could feature an increase in U.S. sorghum acres. Farmers planted 5.7 million acres to sorghum last year, and some industry experts are calling for increases this year. Sorghum prices have been rising in the U.S. (FOB NOLA sorghum priced at $192/MT versus $167.50/MT this time last year) and, with the decline of wheat area, farmers may plant more sorghum in 2018. Some analysts are hearing reports of sorghum seed sales being stronger than expected.
From a technical perspective, March corn is range-bound and headed sideways now. It will be all about the fundamentals in tomorrow’s USDA report. Looking ahead, there’s simply not a whole lot that the USDA can use to surprise the market. A sudden change in foreign production or a larger-than-expected change to U.S. December 1 stocks are seemingly the most likely possibilities. Historically, however, the January WASDE is not a market-shocking report and, given this, corn is likely to begin next week’s trade right around $3.50/bushel.
3. U.S. Weather/Crop Progress
U.S. Drought Monitor Weather Forecast: Over the next 5-7 days, precipitation is widespread over much of the contiguous United States, with all but areas of the Southwest expecting to record some precipitation. The Pacific Northwest and northern Rocky Mountains are anticipated to have significant precipitation with liquid amounts of 3-4 inches along the coasts of northern California, Oregon, and Washington as well as over much of northern Idaho and western Montana. Significant precipitation is also anticipated over the Ohio River Valley and into the Mid-Atlantic, where 1.50-2.50 inches of liquid precipitation is forecast over widespread areas. Cooler than normal temperatures are anticipated over most areas east of the continental divide with departures of up to 15 degrees below normal while the western areas are anticipated to be warmer than normal with departures of 5-10 degrees above normal.
The 6- to 10-day outlooks show that the trend of warmer over the West and cooler over the East will likely continue. Temperatures have the greatest chance of being below normal over the Mid-Atlantic into the Southeast and above normal over the Southwest. Precipitation chances are projected to be greatest over the Great Basin and Pacific Northwest as well along the Mississippi River Valley. Drier than normal conditions are anticipated to mainly be over the areas of west Texas and southern New Mexico as well as along the coastal regions of the Southeast, with higher than normal chances of dry conditions along much of the east coast.
Follow this link to view current U.S. and international weather patterns and future outlook: Weather and Crop Bulletin.
4. U.S. Export Statistics
Corn: Net sales of 437,700 MT for 2017/2018 were up noticeably from the previous week, but down 54 percent from the prior 4-week average. Increases were reported for Japan (163,700 MT, including 32,800 MT switched from unknown destinations and decreases of 3,200 MT), Colombia (86,400 MT, including 72,500 MT switched from unknown destinations and decreases of 4,900 MT), Taiwan (70,800 MT), Vietnam (60,000 MT), Peru (30,400 MT, including 33,500 MT switched from unknown destinations and decreases of 5,600 MT), and Costa Rica (30,300 MT, including 27,600 MT switched from Honduras). Reductions were reported for Honduras (26,600 MT) and the French West Indies (7,300 MT). Exports of 889,800 MT were up 35 percent from the previous week and 38 percent from the prior 4-week average. The destinations were primarily to Mexico (226,300 MT), Colombia (200,500 MT), Peru (157,400 MT), South Korea (133,500 MT), and Japan (116,900 MT).
Optional Origin Sales: The current optional origin outstanding balance of 657,500 MT is for South Korea (342,000 MT) and unknown destinations (315,500 MT).
Barley: No net sales were reported for the week. Exports of 1,300 MT were reported to Japan.
Sorghum: Net sales of 170,700 MT for 2017/2018 were up noticeably from the previous week, but down 40 percent from the prior 4-week average. Increases were reported for China (104,700 MT, including decreases of 1,300 MT) and unknown destinations (66,000 MT). Exports of 53,700 MT were down 29 percent from the previous week and 61 percent from the prior 4-week average. The destinations were China (52,700 MT) and Mexico (1,000 MT).
6. Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS prices are steady/slightly lower this week with lower supplies and rising feed demand. Cash soybean meal values are steady while FOB ethanol plant DDGS fell $2/MT this week, leaving the per-protein unit cost of DDGS $0.66 lower than soybean meal. Barge CIF NOLA prices are steady this week while FOB NOLA prices are $2/MT lower on light trading volume. FOB NOLA prices are 124% of FOB NOLA corn values, which is at the upper end of the ratio’s two-year trading range. Prices for 40-foot containers destined for southeast Asia are $1/MT higher on average, but with light trading volume.
Merchandisers are reporting a quiet week as buyers are sidelined due to firm and steady asking prices. Buyers are hoping for a downward break in prices, but most sellers are sticking to asking prices with cold weather keeping domestic feed demand elevated. Moreover, natural gas prices are higher which may further slow ethanol production and keep DDGS supplies tight.
7. Country News
Canada: The Canadian Grains Commission reports that the 2017 barley crop planted area and yield was lower than in 2016, but the quality was very good with high kernel weights and plumpness. The area planted to barley was down 10 percent and yields were down 4 percent. (World-Grain)
China: Sinograin sold all 26.7 KMT of 2014 corn offered for sale at an average price of 1,870 yuan ($287.71)/MT. The higher price was obtained due to the better quality offered and the fact that Chinese corn futures prices have risen 12 percent over the past quarter. (Reuters)
Mexico: Members of the National Tortilla Council agreed not to raise the price of their product after government economy ministry officials promised to help contain high costs of corn and fuel. The government is trying to stymie public perceptions of inflation in an election year and tortilla makers had sought a 20 percent increase in prices. (Reuters)
South Africa: Johannesburg corn prices had been rallying due to concerns about renewed drought but subsequently fell based on carryover inventories for 2017 and new prospects for rain in production areas. Yellow maize for March delivery fell by 1.6 percent to 2,012 rand ($162.09)/MT and white maize prices dropped by 2.2 percent to 1,981.6 rand ($159.59)/MT. (AgriMoney)
9. Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: Dry-bulk ocean freight markets attempted to rally back from last week’s big fall. At week’s end things are slightly improved week-over-week, but most of the strength from early in the week has diminished. We are still seeing good volatility in the Baltic indices. Yesterday the SC1-U.S. Gulf to China index was up 939 points on the day; today it is down 594 points. Physical markets are slightly better as vessel owners remain optimistic and stubborn and try to hold out for the higher figures they desire. Last week the U.S. Gulf Panamax market to China was down $1.25/MT; this week it is up $1.50/MT, so there is no big overall net change in things.
The charts below represent 2017 annual totals versus 2016 annual totals for container shipments to Hong Kong.