Market Perspectives
December 18, 2009
Download the PDF

This is our last Market Perspectives report of 2009. The first issue of 2010 will be January 8, 2010. We wish you a healthy and happy holiday season!

1. CHICAGO BOARD OF TRADE & GLOBAL MARKET NEWS
Week in Review

Outlook

Ethanol margins are running 90 cents a bushel and that could encourage bidding supplies away from exports.  Meanwhile, light test weights in the Northern Plains (estimated at 52 pounds/bushel for 25 percent of the area) will predestine that portion of the corn crop to the ethanol plant rather than the export elevator.  South American suppliers are promoting problems with U.S. supplies—one involving long demurrage charges at U.S. ports and another claiming specs barely being met due to damage from mechanical drying.  Still, U.S. corn is being sold into export and either way, U.S. and global corn stocks are likely to decline in 2010/11.   Prices may get pushed farther as various funds rebalance, presumably buying a fair amount of corn.  But there remains uncertainty, as the lack of a definitive new position limit imposed by CFTC keeps many funds debating over how far to go.  And stiff competition from Argentina plus feed wheat keeps a fundamental cap on too much excess.

2. CBOT FUTURES
CBOT March 2009 Corn Futures (CH0):

Current Market Values:

3. U.S. WEATHER/ CROP PROGRESS
U.S. Drought Monitor Weather Forecast

Warmer than normal temperatures through much of the central part of the country early in the December 17 – December 21, 2009 period will give way to below normal temperatures from the Plains to the East Coast later in the period.  Near-normal temperatures are expected to dominate the western U.S.  Precipitation is expected along the northern West Coast, along the Gulf of Mexico coast, and from the northern Midwest to the East Coast.

From December 22 – 26, 2009, the odds favor cooler-than-normal conditions over most of the eastern U.S. and across the states bordering the Gulf of Mexico up into the Midwest.  The West, mostly from the Rockies westward and particularly in the extreme Southwest, is likely to see normal to above normal temperatures.  Normal to below normal precipitation is expected from the Midwest through the Ohio Valley and into the Southeast.  Above normal precipitation is expected in the Northwest, the Northeast, and along the western Gulf Coast.  

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 1,227,100 MT--a marketing-year high--were up 45 percent from the previous week and 59 percent from the prior 4-week average.  Increases were reported for Mexico (291,800 MT), Japan (278,000 MT, including 30,200 MT switched from unknown destinations), Egypt (180,000 MT), South Korea (152,000 MT, including 54,000 MT switched from unknown destinations), Costa Rica (97,500 MT, including 23,200 MT switched from unknown destinations), unknown destinations (92,800 MT), and Taiwan (51,300 MT, including 12,000 MT switched from unknown destinations).  Decreases were reported for Canada (17,100 MT) and Panama (10,200 MT).  Exports of 776,500 MT were up 10 percent from the previous week and 7 percent from the prior 4-week average.  The primary destinations were Japan (303,300 MT), Mexico (107,700 MT), Ecuador (63,400 MT), South Korea (54,300 MT), Guatemala (42,700 MT), Panama (31,200 MT), and Cuba (27,500 MT).   

Barley:  There were no sales or exports reported during the week. 

Sorghum:  Net sales of 109,700 MT were for Mexico (106,900 MT) and Japan (10,200 MT, including 7,500 MT switched from unknown destinations).  Decreases were reported for unknown destinations (7,400 MT).  Exports of 24,100 MT were mainly to Japan (19,700 MT) and Mexico (4,200 MT).

5. FOB

6. DISTILLER’S DRIED GRAINS WITH SOLUBLES (DDGS)
Exports are still on the rise, despite many offsetting declines and increases in various regions of the world. The export market seems to be largely defined by logistics, competition from Russian Black Sea feed wheat, and political issues such as the Turkey GMO ban on DDGS*. The countries where we see declines in exports are nearer to Black Sea export ports and in those where we see increases, the U.S. has logistical, quality and import duty advantages. (Not to mention the good marketing performed by the U.S. Grains Council members and staff).

* The Turkish GMO situation has improved and the Hazmat issue as well.

Domestic
DDGS prices have not changed much in the last week in terms of export values, but domestic prices at FOB ethanol plants are down about $10.00-15.00/short ton for nearby delivery. Reliable sources say that this may be the result of the cold snowy weather making rail car availability at the plants quite limited, therefore forcing plants to discount the DDGS in the local truck market. 

Exports
Near term exports are solid and there is good demand for Asian containers and barges nearby CIF NOLA.  Mexico is steady and Canada is slowly picking up demand.

7. COUNTRY NEWS
Argentina:  Corn export sales are being made rapidly, with prices jumping from +32cH to +54cH and a C&F sale made to Saudi Arabia at $230/MT.  Old crop corn is being moved through February when new crop corn becomes available.

China:  China is becoming the largest market for U.S. DDGS, taking an impressive 144,892 tons in October alone, which is almost as much as the country imported during the entire 2008/09 marketing year.

India:  Corn prices have been trending higher for many weeks but there has been a disconnect with end-product prices like chicken and egg, which have been moving lower since early November.  Farmers are reportedly holding stocks of grain.

Russia: The strengthening of the dollar has made Russian grain a little more competitive with corn in the interior gaining $6.50/MT in value to $156.40/MT.  On the downside, the Federal Rail Service intends to raise tariffs by 9.4 percent at the first of the new year.

Ukraine:  Feed wheat prices moved $5/MT higher based on export demand, while barley is now offered at $140-143/MT for near-term shipment. Corn added $5 to $185-190/MT at Black Sea ports. 

8. OCEAN FREIGHT MARKETS AND SPREADS

Recent Vessel Fixtures: 25000 mt Wheat Sevastopol Ukraine to Mombasa Kenya for 28-31 Dec  $52.00 fio 12000sx/4000sc - Noble

25,000 mt Grain, River Plate Argentina to UK/Continent for 25-31 Dec. $36.50 fio shink/5,000 out.

9. OCEAN FREIGHT COMMENTS
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting

This is the last full report for 2009. Due to the Thursday-Friday holiday schedule over the next two weeks there will not be another full transportation report until 8 January 2010.  If time and data allow I will try to put out some short market updates between now and then. I hope everyone made it through 2009 in good shape and that 2010 will be a better year for all.

On the subject of world freight markets—things continue to be in holiday mode and relatively quiet. As we all know, a quite market tends to be a soft/weak one and that is indeed what is generally happening, especially in the Pacific. The Atlantic/U.S. Gulf market has gone down and then back up to about where it ended last week. Things in the Pacific have been just plain weak. The freight spreads between the U.S. Gulf and PNW to Asia have therefore widened, in favor of the PNW. The market is fairly flat going from December into January but still slightly inverted looking out to February-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:         $18.50-$18.75
Three weeks ago:       $15.50-$15.75
One week ago:           $14.00-$14.50
This week                    $13.00- $13.50 (Down $1.00/mt from last week).

*Two of the commodities that do not show up on the USDA-FGIS weekly export inspections report is DDGS and SBM. Shipments of DDGS to China have risen dramatically this year.

10. INTEREST RATES

This e-mail address is being protected from spambots. You need JavaScript enabled to view it 1400 K Street NW, Suite 1200, Washington, DC 20005
Phone: (202) 789-0789      Fax: (202) 898-0522

 The U.S. Grains Council does not discriminate on the basis of race, color, national origin, sex, religion, age, disability, political beliefs, sexual orientation or marital/family status. Persons with disabilities who require alternative means for communication of program information should contact the U.S Grains Council.