Outlook: With bearish supply news and exports underwhelming, the U.S. corn market is in over-supply mentality for a while to come. USDA says that it will check in March to see what the final was on 400 million bushels of corn still in the fields in January, but that will be of little consequence as the American Farm Bureau expects the 2009/10 record 13.15 billion bushel corn crop to be followed in 2010 with a 4 million acre increase in plantings. U.S. corn ending stocks were increased to 1.76 billion bushels but they might grow further to 1.9 billion, a level close to what the market might see as a burden. Markets will want to see stronger global economic growth in 2010 in order to absorb all of this supply. And farmers holding high moisture corn may decide it is better to unload it than to risk quality problems in storage.
CBOT MARCH CORN FUTURES
Current Market Values:
U.S. WEATHER/CROP PROGRESS
U.S. Drought Monitor Weather Forecast:
Through January 19, 2010, a nice warm up is in store for almost the entire country, with some readings expected to be 10 to 20 degrees above normal in the northern Plains. More modest warming is expected elsewhere, but it is a nice change of pace from the bitter cold of the past few weeks. The best bet for significant precipitation (one inch or more of liquid equivalent) seems to be concentrated across the Pacific Northwest and northern California, which could really use it. The other area worth noting, for those drought-affected regions, is across southern Texas, where the odds favor some beneficial rains.
The forecast for January 19-23 is also quite favorable precipitation-wise and perhaps reflective of a pattern change as a result of El Niño (favoring above-normal precipitation across the southern tier states). The odds are good for above-normal precipitation across most of the West. West Texas (the Big Bend area in particular) looks to remain dry during this timeframe. The entire eastern half (all but southern Florida) of the country has increased chances of above-normal temperatures, with the best chances found in the Upper Midwest and Great Lakes regions. 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 327,300 MT for delivery in 2009/10 were down 10 percent from the previous week and 67 percent from the prior 4-week average. Increases were reported for Japan (124,400 MT, including 97,700 MT switched from unknown destinations), South Korea (115,000 MT), Taiwan (80,500 MT, including 45,000 MT switched from Japan), Peru (32,000 MT), the Dominican Republic (28,500 MT, including 3,000 MT switched from Colombia), Morocco (15,800 MT, switched from unknown destinations), and El Salvador (4,700 MT, switched from Guatemala). Decreases were reported for Egypt (52,700 MT), Mexico (21,800 MT), Guatemala (5,100 MT), and Colombia (3,500 MT). There were no sales reported for delivery in 2010/11. Exports of 658,000 MT were down 18 percent from the previous week and 8 percent from the prior 4-week average. The primary destinations were Japan (229,000 MT), Taiwan (111,800 MT), Mexico (74,900 MT), Peru (54,000 MT), the Dominican Republic (37,300 MT), and Panama (32,900 MT).
Barley: There were no sales reported during the week. There were no exports reported during the week.
Sorghum: Net sales reductions of 100 MT were for Mexico. Exports of 11,700 MT--a marketing-year low--were to Mexico.
FOB
DISTILLER'S DRIED GRAINS WITH SOLUBLES (DDGS)
DDGS prices are down about -$5.00-10.00 mt this week depending on the delivery location. Overall export demand has been steady this week. Logistics still are a bottleneck from the Midwest to most rail destinations and that continues to pressure FOB ethanol plant prices.
Domestic: The domestic market is steady in the cattle and poultry sectors but very weak in the swine sector. DDGS prices in trucks are trading somewhere around $90-95 st, and rail delivered to California is at $165.00 January. Rail freight from the Midwest is only $55.00 mt but it is hard to find rail cars.
Exports: Container freight availability for export has improved this week but shipping is still a little behind in Chicago. Demand for container DDGS to Asia has been strong.
CIF Nola barges prices have been down and trade volume is also down this week. There is some improvement in river logistics—ice-free areas of the river are moving north a bit this week. Demand from Mexico has been good this week, with one broker reporting about 10,000 mt traded.
COUNTRY NEWS
Argentina: USDA’s WASDE raised the corn crop estimate by 1 MMT to 15 MMT, but the market had expected a 16 MMT projection with a potential for 18 MMT. Buyers became more active after the WASDE report, reinforced by their continued concerns about U.S. quality. New crop March corn is being offered at 25 cents over Chicago, or 60 cents less than for old crop. Saudi made a $183/MT FOB purchase during the holidays.
Brazil: Local corn has now become too expensive to export and movements will likely have to wait for new crop availability at the end of March, which makes Uruguay a stronger near-term prospective supplier.
India: Consumer food prices continue rising and poultry producers are asking that soybean meal exports be restricted in order to keep down their cost of production. However, the government may favor its foreign exchange earnings.
Philippines: Maize producers remain frustrated by prices (US$0.23-0.25/kilo) pushed lower by imports and feed substitutes, and wonder why millers have not switched back to using corn. The government did impose a 12 percent tax on imported eggs.
Russia: Interior feed wheat and barley prices firmed but corn lost $11.60/MT.
Ukraine: Feed wheat (@$168/MT FOB Black Sea ports), barley (@$142/MT FOB) and corn (@$187/MT FOB) prices are flat. Exporters are awaiting VAT rebates, which will cause prices to drop.
Vietnam: The government boosted the tariff on imported animal feed (corn, soy, grain, fishmeal) by 5-15 percent in order to suppress imports. About 70 percent of animal feed is imported and the tariff is expected to boost food prices
OCEAN FREIGHT MARKET AND SPREADS
OCEAN FREIGHT COMMENTS
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: It’s already a bumpy ride for vessel owners and for vessel charterers and it is just the first month of 2010. Freight markets came out of the shoot strong during the first week of the New Year. Now things seem to be adjusting back a bit. The Baltic indices are down about 11 percent from last Fridays levels.
It’s hard to say what will happen next week because every time things look like they are set to move lower—they change. The news on China is very mixed. You can pick up a paper that says their economic stimulus program is starting to run out of steam and you can also read that their economy is growing strong and that Chinese exports are increasing. It does look as if they will obtain at least an 8 percent growth in GDP this year. The one thing that is certain is that China’s demand for raw materials, up or down, will remain the key to our freight markets for 2010. We know the vessel fleet/freight supply is growing, we just don’t know exactly how this will balance against China’s demand situation. I’m still thinking that the 2010 freight supply should outweigh world demand growth, but the jury is out on that question.
We in the U.S. have even created a little import demand for grain/wheat. At the moment there are two vessels in the unload lineup at the Port of Willington, NC. These are vessels that loaded wheat out of the Brazilian port of Paranagua. They will be carrying close to 23-25,000 mt of wheat each and destined for Eastern Hog markets. On a SWAG I’m guessing that the freight from Southern Brazil to the U.S. Atlantic was something close to $38-$40.00/mt. I can obviously be off a few bucks on that guess.
World freight markets remains inverted out to February and March.
As a general freight market reference and indicator, below is a recent history of freight values for Cape size vessel shipments of iron-ore from Western Australia to China:
Four weeks ago: $12.75-$13.25
Three weeks ago: $10.55-$10.75
One week ago: $12.50-$12.90
This week $12.25- $12.50 (Down slightly from last week).
In dollar terms, the current spot and 30-day U.S. Gulf to Japan Panamax market is currently near $70.00/mt. The 30-day Panamax rates from the PNW to Japan are approximately $40.00/mt. The PNW/Gulf freight spread to Asia is approximately $30.00/tonne (.76/bushel for corn and .82/bushel for wheat and soybeans).
* Fob vessel Soybeans offers are thin from the PNW. It is therefore extremely difficult to determine an accurate soybean market spread to the US Gulf. PNW fobbing capacity for January and February is largely committed and therefore tight. Corn quality is a significant challenge for all vessel loaders.
INTEREST RATES
