1. Chicago Board of Trade Market News
Outlook: Last Friday’s WASDE was certainly bearish the corn market. The USDA increased 2017/18 corn production by 26 million bushels to 14.604 billion. The additional production came on the back of a decrease in harvested area (from 83.1 million acres to 82.7) and a 1.1 bushel/acre increase in yield (from 175.4 to 176.5). Feed and residual use was decreased 25 million bushels and no other consumption variables were increased in the balance sheet. The combination of these factors increased ending stocks 40 million bushels (2 percent) to 2.477 billion.
While the WASDE was bearish the corn market, it held a more positive tone for the sorghum market. USDA increased its yield forecast 2 bushels/acre to 72.1 and added 5 million bushels to feed and residual use. Exports were left unchanged, however, but USDA increased the bottom end of its price range forecast to $2.85/bushel.
The USDA’s weekly export sales report will be issued tomorrow, but Monday’s Export Inspections report featured 584,000 MT of corn inspected for export, down from the prior week and putting YTD totals down 36 percent. The U.S. dollar has been falling sharply during the past week, however, and this may give U.S. exporters the competitive boost needed to ship more corn.
From a technical perspective, March corn futures are caught between heavily-short funds who see few bullish events in the world and value-buying commercials. Consequently, the contract has traded a narrow range right around $3.50, getting sold off when the price rises much above that point and with commercials supporting the market when it gets below. The trend is sideways until some fundamental factor shakes the market lose.
Right now, it’s difficult to tell what might move the market. The South American weather, with too much rain in Southern Brazil and too little in Argentina, is a possible bullish factor but its risks are already well priced into the market. NOAA’s long-term forecast today called for continued dryness in the Plains and a wetter-than-normal pattern in the eastern Midwest. The latter may develop into a delayed planting scenario, but it is far too early to call for this. The former may discourage planting/inhibit production, but again it is too early to tell. For now, March corn marches sideways while the world looks for some reason corn shouldn’t be priced at $3.50/bushel.
3. U.S. Weather/Crop Progress
U.S. Drought Monitor Weather Forecast: Over the next 5-7 days, the active pattern over the Pacific Northwest is anticipated to continue, with heavy rains along the coastal areas from northern California up to Seattle. Farther inland, precipitation should be widespread from Washington and Oregon into Idaho and western Montana, with the greatest amounts over the panhandle of Idaho. Precipitation from the central Rocky Mountains will pass through the central Plains and into the upper Midwest and Great Lakes. Much of the eastern half of the United States is projected to receive precipitation. During this period, temperatures are anticipated to be 3 to 6 degrees below normal west of the Continental Divide and 6 to 9 degrees above normal to the east. This should help bring the snow levels down over the western United States, allowing for snow accumulation to take place.
The 6- to 10-day day outlooks show that temperatures are anticipated to remain cooler than normal over the western and north central United States, with the greatest probability of below-normal temperatures over Montana and Wyoming. Warmer than normal temperatures are projected over much of the eastern third of the country, with the greatest chances of above-normal temperatures along the eastern seaboard from Florida north into New England. The probability of above-normal precipitation is great over much of the United States outside of the desert Southwest. The highest chances of above-normal precipitation are over the Great Basin and lower Mississippi Valley.
Follow this link to view current U.S. and international weather patterns and future outlook: Weather and Crop Bulletin.
4. U.S. Export Statistics
Note: Due to the Monday, January 15 holiday, weekly U.S. export sales will be published on Friday, January 19. Updated U.S. export sales will be next published in the January 25, 2018 edition of Market Perspectives.
6. Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS prices are mixed this week, with reported prices for CIF NOLA Barges falling but FOB Gulf prices increasing. Reportedly, trading volume has been light this week with sellers defending asking prices and buyers somewhat unwilling to chase prices higher. Prices for 40-foot containers to Southeast Asia are higher again this week, gaining $5/MT on average. February shipments to Myanmar increased the most of any Asian destination this week, gaining $7/MT, while shipments to Indonesia and China increased $6/MT each.
Domestically, rising soybean meal prices are helping move additional product into livestock feed rations. The per-protein unit cost of DDGS reached $5.53 this week, $0.74 cents less than that of soybean meal. Four consecutive days of higher soybean meal futures have seemingly put in place an opportunity for DDGS.
7. Country News
Argentina: The drought is expected to reduce corn yields in the Pampas grain belt. Consultancies Agritrend and Agripac have each dropped their estimates for production to around 39 MMT, the same amount harvested last year but down from the 42 MMT predicted earlier for this season. The Rosario Grains Exchange predicts 39.9 MMT of corn production but the Buenos Aires Grain Exchange is sticking with its 41 MMT forecast until the rains of January and February are better understood. Better yields in some areas could offset declines in the drought affected area. (Reuters)
Brazil: The official crop agency Conab slightly raised (0.5 percent) its forecast for the summer corn crop to 25.18 MMT. That is down 17 percent from a year earlier as farmers switched to planting more profitable soybeans. The summer corn crop area is down 9.2 percent. (SP Global)
Russia: Barley exports are at a record pace and could exceed 5 MMT, says UkrAgroConsult. November barley exports were nearly 500 KMT, an 87 percent increase over the same month a year earlier. Barley exports during the first five months of the 2017/18 marketing year were up 78 percent. (World-Grain)
Saudi Arabia: The state grain buying agency purchased over 1 MMT of barley at an average price of $216.73/MT. That is a slight increase (0.75 percent) over the price paid in November. Suppliers were global including Australia, North and South America, Europe and the Black Sea. (Reuters)
Ukraine: Grain exports during the first six months of this marketing year are down nearly 10 percent. Exports have thus far included 3.8 MMT of barley and 6.7 MMT of corn. (World-Grain)
9. Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: Despite the market’s attempts to hold up values the Q1 2018 slump in demand continues to weigh on Dry-Bulk markets. Grain volumes are down for Panamax and Supramax vessel cargo, and even the Capesize market has taken a big hit from lower iron ore and coal demand. Demand may pick up after we transition into Q2 of the year, but for now the market is back to dealing with more vessels chasing a slow growth in cargo demand.
Vessel owners are still optimistic about the 2018 outlook, and we will have to see just how their hopes play out.
The charts below represent 2017 annual totals versus 2016 annual totals for container shipments to Indonesia.