1. Chicago Board of Trade Market News
Outlook: On Monday the USDA reported that the planting pace of U.S. corn was 95 percent complete, which was just about even with the five-year average rate of planting at 94 percent. Rains had caused the planting pace to slow more recently, but the fact that this season’s initial plantings began sooner-than-average has caused the current emergence rate of 84 percent to be above the five-year average of 79 percent and last seasons’ emergence rate of 77 percent. Early emergence can be beneficial if a crop is able to avoid the peak heat of summer. Of course, the period of peak heat varies each season by timing, length and intensity.
Last season the U.S. corn crop developed well right into a relatively wide window of pollination. Plants also benefited from a summer with little excessive heat and generally sufficient moisture to work through the increased stresses of the pollination period that allowed ears to mature with limited stress on plants. This season market participants will be anxiously keeping an eye how the young plants develop prior to pollination. Excessive moisture and insufficient heat units can also create stresses and impede plant development. The near-term outlook is that any form of persistent decline in the reported weekly average crop condition for U.S. corn during the next month will most likely result is some weather premium being purchased into corn contracts prior to pollination.
3. U.S. Weather/Crop Progress
U.S. Drought Monitor Weather Forecast: For the upcoming period through June 8, decent precipitation should occur across the Great Basin, north-central Rockies, central and northern Plains, most of the Midwest and Great Lakes region and along most of the southern Atlantic Coast States (from Florida northward into Virginia). Little or no rainfall is expected in the Far West, Southwest, southern third of the Plains and coastal New England. Temperatures should average above-normal in the Northwest, southern half of the Plains, middle and lower Mississippi and Ohio Valleys. Elsewhere it should be near or slightly below-normal.
For the ensuing period of June 9-13, the CPC 10-day outlooks, odds favor above-median precipitation in the Southwest, Great Basin, central Rockies and Plains and eastern-third of the nation, with subnormal precipitation likely in the Northwest, northern and southern Plains. Above-normal temperatures are favored in the West, northern Plains, the Southeast and along the Eastern Seaboard. 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 464,900 MT for delivery in 2014/15 were down 29 percent from the previous week and 31 percent from the prior four-week average. Increases were reported for Japan (183,200 MT, including 38,800 MT switched from unknown destinations and decreases of 1,600 MT), Mexico (133,800 MT), Egypt (55,000 MT), China (55,000 MT, switched from unknown destinations), Colombia (42,900 MT, including 40,000 MT switched from unknown destinations and decreases of 7,300 MT) and Peru (29,700 MT). Decreases were reported for unknown destinations (162,600 MT), Guatemala (2,600 MT) and Trinidad (800 MT). Net sales reductions of 54,800 MT for 2015/16 resulted as increases for unknown destinations (25,400 MT) and Panama (800 MT), were more than offset by decreases for Japan (50,000 MT), Canada (25,000 MT) and Colombia (6,000 MT). Exports of 957,400 MT were down 11 percent from the previous week and 13 percent from the prior four-week average. The primary destinations were Mexico (351,500 MT), Japan (205,400 MT), Peru (99,000 MT), Colombia (90,200 MT), China (58,500 MT) and Costa Rica (40,100 MT).
Barley: Net sales reductions of 100 MT for 2014/15 were reported for Japan. Net sales of 100 MT for 2015/16 were reported for South Korea. Exports of 15,900 MT were reported to Japan.
Sorghum: Net sales of 24,500 MT for 2014/15 resulted as increases for China (77,500 MT, including 53,000 MT switched from unknown destinations and decreases of 3,900 MT), were partially offset by decreases for unknown destinations (53,000 MT). Exports of 206,500 MT were up 85 percent from the previous week and 27 percent from the prior four-week average. The destination was China and includes 48,000 MT late reporting.
6. Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS merchandisers noted that demand has slowed and prices trended downward this past week. Customers were making inquiries about potential purchases for September through December, but the bids generally remain well below the offers because many customers desire to see how prices will develop in U.S. feed grain markets this summer. The result is that merchandisers offered additional price concessions in order to entice more near-term buying and movement of inventory.
The price of bulk DDGS delivered to the Gulf of Mexico in June declined by more than $15/MT and by more than $10/MT for delivery in July or August. Offers to domestic buyers also declined by as much as $15/MT for sizable bulk purchases of rail-delivered DDGS during the June-August time period. Containerized DDGS prices had already been in decline during the past few weeks, but they also dropped by an additional $5/MT for June-August.
DDGS buyers from China and Korea were making inquiries this past week about the best possible price, but none seemed active. However, there are market rumors that a Vietnamese customer has made a sizable purchase of DDGS. That could end up looking like a very wise decision a couple of weeks from now because there is a seasonal tendency for Chicago corn futures contracts to bounce higher prior to the period of corn pollination.
Ethanol Comments: The weekly ethanol production data from the Energy Information Administration (EIA) held a couple of significant points this week: The first point is that the total ethanol stocks remained stationary at 20.1 million barrels while there was a slight increase in the average daily production rate from the week-ago rate of 969,000 barrels per day (bpd) to the current rate of 972,000 bpd. The second more significant factor is that the current total stocks level of 20.1 million barrels is now only 10 percent above the year ago inventory of 18.3 million barrels. This reduced percentage in relation to a year ago implies that current ethanol prices, which are already well below year ago, do not need to continue weakening if the price of gasoline stabilizes.
The differentials between the spot price of corn and ethanol co-products in primary regions of the Corn Belt are not producer margins, but the data does imply that sizable differences in year-over-year actual returns does exist for the majority of ethanol facilities. The differentials for week ending June 5, 2015 are as follows:
- Illinois differential is $2.19 per bushel in comparison to $2.39 the prior week and $3.64 a year ago.
- Iowa differential is $1.98 per bushel in comparison to $2.14 the prior week and $3.49 a year ago.
- Nebraska differential is $1.69 per bushel in comparison to $1.84 the prior week and $3.38 a year ago.
- South Dakota differential is $2.31 per bushel in comparison to $2.42 the prior week and $3.91 a year ago.
7. Country News
China: USDA has indicated that Chinese imports of U.S. DDGS totaled 601,834 MT in April, which is the second-largest monthly shipment ever reported, according to Reuters. The largest prior shipment was in November 2013, when China imported 609,938 MT. Total U.S. DDGS exports for April totaled 928,120 MT, which was the highest amount shipped since the 1.086 MMT shipped in August 2014.
Japan: The world’s largest corn buyer will be cutting imports of feed corn in favor of domestic rice, reports Bloomberg News. Corn purchasing could drop by 3 percent from the 15 MMT Japan purchased in 2014, which would be a 27-year low.
Ukraine: One of Ukraine’s largest agriculture companies, Mriya Agro Holding Plc, is close to securing assistance from creditors that would allow it to avoid liquidation, reports Bloomberg News. The company defaulted on $1.2 billion in debt last year, but has secured a six-month, $25 million deal that will allow the company to complete the winter harvest as well as buy much needed fertilizer for spring corn planting.
9. Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: What new can be said about these vessel markets? Not much. The Capesize market was mostly flat this week.
The Panamax sector saw a little better demand and slightly higher long-term time charter rates. But the Panamax voyage charter market is still not willing to pay up and is therefore mostly unchanged for the week. The news coming out of the big Shipping Norway conference mostly involves vessel owners stating the obvious “we got it wrong” and “we have to face the music”. Now we will see if they really mean it and stay away from ordering new ships.
With delivered PNW rail corn bid at +93 N and FOB vessel trading at about the same, or slightly lower, it looks as if we are trading negative fobbing margins out there for June-July. However negative rail car values of up to $350-$375 per car will add .08-.09 cent per bushel ($3.15-$3.54/MT) to this calculation. Add in some rumoredrail rate incentives and the fobbing margins in the PNW become attractively positive. So export corn and soybean business should continue to flow in that direction.
The charts below represent January-December 2014 annual totals versus year-to-date 2015 container shipments to China.