Outlook: Corn is basically trading on the bet that what is left in U.S. fields will be at lighter test weights when/if it ever gets harvested.  It is not totally clear how USDA will handle this when it issues its January WASDE report this coming Tuesday (12 January).  The trade is expecting USDA to make a 50-100 million bushel reduction in its revised 2009/10 corn production estimate.  Global corn stocks are relatively tight, and headed tighter.  On the demand side, cheaper competition has left U.S. corn exports disappointing, though that may be changing, and ethanol provides solid demand.  With corn needing an additional 3 million acres planted in the U.S. in 2010, the battle with soybeans over price will likely heat up.  Then there are the larger issues like the dollar, oil prices, commodities as part of the investor’s portfolio, weather, etc.  Corn traders are right now focused on small changes in the 2009/10 crop, and the rebalancing of capital by investors in commodity funds.  Soon, however, their attention will turn toward crop prospects in South America.

CBOT MARCH CORN FUTURES

Current Market Values:

U.S. WEATHER/CROP PROGRESS

U.S. Drought Monitor Weather Forecast: Through January 12, 2010, the weather will remain very cold over much of the country with readings falling 10-20 degrees below normal from the Rockies east to the Atlantic. Parts of the West including Arizona, Nevada, California, western Oregon and north-central Montana can expect to escape the chill and see above-normal temperatures. The best bet for precipitation is found along the West Coast from northern California up to Washington. The upper Midwest and parts of the Ohio Valley and Gulf Coast may see moderate totals as well. Much of the West looks to be pretty dry over the next 5 days or so.

From January 12-16 the weather is beginning to nicely reflect a traditional El Niño pattern and calls for better odds of above-normal temperatures on the west coast (from California up to Washington) and the northern tier states from Washington east to the Great Lakes region. Cooler temperatures are likely along the Gulf Coast from Texas to Florida and up the east coast from the Carolinas to New England. The Rockies from Colorado up to central Montana are likely to see below-normal precipitation. Two areas of possible above-normal precipitation are found in the Gulf Coast states along with the Carolinas and the Upper Midwest, including Minnesota and Wisconsin.  Follow this link to view current U.S. and international weather patterns and the future outlook: Weather and Crop Bulletin.

U.S. EXPORT STATISTICS

Corn: Net sales of 364,700 MT were down 53 percent from the previous week and 67 percent from the prior 4-week average.  Increases were reported for Mexico (165,600 MT), Cuba (125,000 MT), South Korea (40,800 MT), Japan (39,300 MT), Venezuela (34,500 MT, including 34,000 MT switched from unknown destinations), Canada (21,100 MT), and Ecuador (12,800 MT, switched from unknown destinations).  Decreases were reported for unknown destinations (95,700 MT) and Guatemala (14,200 MT). Exports of 798,100 MT were down 8 percent from the previous week, but up 16 percent from the prior 4-week average.  The primary destinations were Japan (298,100 MT), South Korea (170,400 MT), Mexico (131,600 MT), the Dominican Republic (68,900 MT), Venezuela (34,500 MT), and Taiwan (22,500 MT).

Barley: There were no sales reported during the week.  Exports of 2,400 MT were to Canada (2,300 MT) and Mexico (100 MT).

Sorghum: Net sales of 42,900 MT resulted as increases for Japan (46,300 MT, including 34,400 MT switched from unknown destinations and decreases of 1,100 MT) and Mexico (31,100 MT), were partially offset by decreases for unknown destinations (34,400 MT).  Exports of 139,200 MT--a marketing-year high--were up noticeably from the previous week and the prior 4-week average.  The destinations were Japan (75,700 MT) and Mexico (63,400 MT).

FOB

DISTILLER'S DRIED GRAINS WITH SOLUBLES (DDGS)

The DDGS market price has remained fairly stable over the last few weeks of holidays. The biggest factor impacting the market has been the weather, which has caused problems ranging from higher petroleum prices to nationwide logistical export problems. Obviously the higher fuel prices are impacting the price of corn, soybeans and DDGS (trying to pull them higher) while at ethanol plants the lack of available rail cars and barges are depressing DDGS prices to the local truck market. We received reliable reports that container availability for export is also very limited because of weather (especially in Chicago).  Export prices (rail and container) are at a premium, anywhere from $5.00-15.00 mt over domestic truck values.

Domestic: As mentioned above, FOB ethanol plant values are depressed by a lack of available rail cars and containers for export, not to mention the frozen river system. Trucks are the next option, but there is limited demand for trucks within 100 miles, so trucks are driving farther to market. That costs more in freight, which is hard to recover at the final destination. There are some new big plants expanding production in Nebraska and Ohio that are pressuring prices for wet feed. This has caused some of the other ethanol plants to start up their dryers and dry the product so DDGS can be shipped out of state. Canola meal from Canada is coming into California, which is also pressuring prices on the West Coast and will definitely impact DDGS prices as well. Poultry demand for DDGS remains steady in the Southeast, which is supportive considering that there is a substantial loss of demand in the swine sector east of the Mississippi River.

Exports: There has been steady barge trade to the Gulf, (CIF NOLA), perhaps impacted by the freezing river. Barges for arrival in New Orleans by January 20, 2010 are trading at a premium to barges for arrival by January 30, 2010. Mexico has had steady business in the last week, which is unusual during the holidays, An estimated 20,000 mt was traded according to one source.  Exports to China expected to reach about 400,000 mt by the year end and growing.

COUNTRY NEWS

Argentina: Good rains and humidity are aiding crop development as crop estimates begin to rise past the USDA December estimate (14 MMT). Some suggest that 18 MMT is possible if weather continues to cooperate.  Meanwhile, old crop is moving, with a January shipment being made at $190/MT FOB.  Concerns about U.S. supplies at the same time that Indian and Thai corn supplies have disappeared from the market have made some buyers anxious. India:  The government of India intends to take on the U.S. government in 2010 over what it perceives as numerous non-tariff trade barriers adversely affecting its sales to America.  India has a de facto dual food safety system—one for domestic consumers and a second for export.  Delhi’s desire to have a technical standards discussion with the U.S. should create an opportunity for Washington to raise its concerns over Indian barriers such as its opaque and inconsistent biotech policy.

Indonesia: Animal feed producers have agreed to increase feed prices effective immediately as a result of higher feed ingredient prices.  The new price for broiler feed will be US50-53 cents per kilogram.

Philippines: Local corn growers are blaming imports and substitute feed ingredients for driving down the value of their production to less than US25 cents/kilogram.

Russia: Corn continues to outperform other feed grains on the market, reaching $170/MT for good quality.

Serbia: While Bulgaria has sold all of its corn, Serbian farmers have been holding on to their stocks.  They likely have about 1.4 MMT of corn that will need to be sold eventually.

Uruguay: Corn will be available on the market around the end of February, getting a jump of supplies from Argentina until the government in BA issues export licenses.

Ukraine: Low demand over the holidays kept corn prices from rising, with barley slipping a dollar per ton.  The government will need to resolve the issue over VAT reimbursement soon after the holidays or else it will force exporters to cut prices.

OCEAN FREIGHT MARKET AND SPREADS