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CHICAGO BOARD OF TRADE MARKET NEWS

Outlook: The U.S. corn crop is maturing quickly, signaling an earlier harvest.  Exports remain robust.  Some analysts are predicting U.S. corn carryover stocks below one billion bushels and prices at $5/bushel, which is bullish in itself.  But then Informa’s forecast of 158.5/bushels per acre, if correct, would send corn to $6/bushel.  Whether this is all true awaits more weather and harvesting.  USDA’s next crack at the number is Friday, September 10.  Meanwhile, looking further out there are suggestions that China could import 5 MMT of corn next year.  But then the market can get ahead of itself.

CBOT SEPTEMBER CORN FUTURES

Current Market Values:

U.S. WEATHER/CROP PROGRESS        

During the next five days (September 2-6), tranquil weather will prevail across the majority of the U.S.  A major exception, of course, will be the interaction between Hurricane Earl and a cold front approaching the East.  On the night of September 2-3, Earl will pass near, or just east of, North Carolina’s Outer Banks.  On September 3-4, Earl will graze coastal New England.  Heavy rain and high winds will accompany Earl’s passage along the immediate coast.  In addition, beach erosion will be a major threat along the middle and northern Atlantic Coast.  Farther west, scattered showers in advance of a cold front will stretch from the upper Midwest into the south-central U.S. on September 2.  The following day, showers will advance as far east as the Appalachians before dissipating.  By September 4-5, scattered showers may overspread the Northwest.  The National Weather Service’s six to 10-day outlook for September 7-11 calls for cooler-than-normal weather across the northern High Plains and much of the West, while near- to above-normal temperatures will prevail across the remainder of the U.S.  Meanwhile, near- to below-normal rainfall across the majority of the nation will contrast with wetter-than-normal conditions across the nation’s northern tier as far east as the Great Lakes region. 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 reductions of 28,500 MT for delivery in 2009/10 resulted as increases for Japan (97,400 MT, including 56,500 MT switched from unknown destinations and decreases of 15,800 MT), Morocco (15,700 MT), El Salvador (12,700 MT, switched from Guatemala), Taiwan (8,600 MT), Egypt (6,000 MT), and China (5,500 MT), were more than offset by decreases for unknown destinations (135,500 MT), Israel (36,100 MT), Guatemala (10,000 MT), the French West Indies (4,300 MT), and the Dominican Republic (2,400 MT).  Net sales of 1,686,700 MT for delivery in 2010/11 were mainly for unknown destinations (848,300 MT), and Japan (515,200 MT).  Exports of 1,142,200 MT were down 3 percent from the previous week, but up 14 percent from the prior four-week average.  The primary destinations were Japan (316,100 MT), Mexico (161,600 MT), South Korea (152,500 MT), China (114,500 MT), Egypt (66,000 MT), and Israel (59,900 MT).

Barley:  Net sales of 100 MT were for the Philippines.  There were no exports reported during the week.    

Sorghum: Net sales of 12,700 MT resulted as increases for Japan (15,300 MT, including 8,600 MT switched from unknown destinations), Mexico (6,000 MT), and Israel (5,900 MT, switched from unknown destinations), were more than offset by decreases for unknown destinations (14,600 MT).  Net sales of 44,100 MT for delivery in 2010/11 were for Mexico (26,000 MT) and Japan (18,100 MT).  Exports of 33,500 MT were to Japan (17,500 MT), Mexico (10,200 MT), and Israel (5,800 MT). 

FOB

DISTILLERS DRIED GRAINS with SOLUBLES (DDGS)

General comments:

The DDGS market is up again this week by about +$7.00 mt over last week in light of strong domestic and export demand. The impact of the downtime taken during August has also been supportive for prices. On the bearish side of the market, the ethanol plants are gearing up for increased production in September and October and expect to be producing a higher quality product with the improved condition of the new corn crop. Some reports from the Southeastern part of the Corn Belt about ethanol production using new crop corn have been very positive. One plant reported that protein and fat levels are up (37-38 percent pro-fat compared to 34 percent for old crop) and ethanol yields are very good as well. The overall quality and consistency of color has greatly improved with the new corn crop production of DDGS.

Because DDGS is currently undervalued with respect to corn and soybean meal prices, the ethanol plants and traders are reluctant to sell at spot prices into the fall and winter months. On the other hand, because of the high prices and higher freight costs to the export destinations being offered by the exporters, the container and bulk export markets for DDGS have reduced their interest in buying for October forward. It will be interesting to see how the market plays this out. Will the domestic demand increase enough to take the slack in export demand, or will export demand continue even at the higher price levels with freight added on?

Some estimate that there will be an additional 500 million gallons of production increase in the month of September due to the grandfather clause that will be enforced by EPA on regulations relating to plant emissions.