1. Chicago Board of Trade Market News
Outlook: Today’s WASDE report was just another in a long string of bearish corn market reports. The report featured growing U.S. ending stocks, a record-high U.S. corn yield, and 147 million bushels of extra corn in ending stocks. Moreover, world production and ending stocks were also revised higher in today’s report. The news has all but sealed corn’s bearish fate for the year.
The national average corn yield was pegged at a new, all-time record high of 175.4 bushels per acre (BPA), 2 percent higher than last month’s forecast and 0.8 BPA larger than last year’s record. Production across the U.S. will reach 14.578 billion bushels, 298 million more than last month’s estimate but down 4 percent from last year.
On the demand side, USDA increased corn consumption for all uses except ethanol, which the agency left at 5.475 billion bushels. Feed and residual use increased 75 million bushels to 5.575 billion, while exports climbed equally to 1.925 billion. This year’s export forecast is 16 percent lower than last year’s volume.
Despite an additional 150 million bushels of corn consumption, this year’s record yield pushed more corn into ending stocks. The 2.053 billion bushel ending stocks figure grew 147 million in this report and stand 8 percent larger than last year’s ending stocks. The ending stocks/use ratio fell 0.2 percent to 17.2 percent, the second largest figure in the past 10 years.
U.S. corn exports so far this marketing year total 225.6 million bushels, or 12 percent of USDA’s total forecast. This is behind the 5-year average pace of 15 percent for the beginning of November.
CBOT futures reacted strongly to today’s report, putting in a new life-of-contract low at $3.40 ¾. The market closed slightly above this point, however, as a sign that cheap corn will bring about some commercial buying support. Factors such as a South American weather/crop damage event or political issues could rally the corn market, but U.S. and world corn markets could very well be range bound for the next several months.
3. U.S. Weather/Crop Progress
U.S. Drought Monitor Weather Forecast: During the upcoming 5-day period (November 9-13), another Pacific storm takes aim at the Northwest (from northern California northward), with the greatest totals (4-8 inches) expected along the immediate coast, in the Cascades, and the northern Sierra Nevada, with lesser amounts (1-2 inches) in the northern Rockies. Light to moderate rain (1-1.5 inches) is expected in a narrow band from central Texas eastward to coastal Georgia and the Carolinas, along the far western Gulf Coast, and in the northern Great Lakes region. It should be dry in the Southwest, Great Basin, and northern and central Plains, with only light amounts (less than 0.5 inches) elsewhere. Temperatures should average above normal in the Southwest, Great Basin, and Rockies, and near to below-normal in the eastern half of the Nation.
During the 6- to 10-day period (November 14-18), odds favor above-median precipitation in the Northwest and the Great Lakes region while sub-median precipitation is likely in southern California, the Plains, and the Gulf and southern Atlantic Coast States. The chances for above-normal temperatures are likely in the middle third of the lower 48 States, especially in the Southwest and southern Plains, with odds tilted toward below-normal readings limited to the Pacific Northwest Coast.
Follow this link to view current U.S. and international weather patterns and future outlook: Weather and Crop Bulletin.
4. U.S. Export Statistics
Corn: Net sales of 2,364,500 MT for 2017/2018 were up noticeably from the previous week and 92 percent from the prior 4-week average. Increases were reported for Mexico (1,166,300 MT, including decreases of 2,000 MT), South Korea (468,000 MT), Japan (337,500 MT, including 39,800 MT switched from unknown destinations and decreases of 300 MT), unknown destinations (213,000 MT), and Colombia (132,700 MT, including 75,100 MT, switched from unknown destinations). Reductions were reported for Brazil (60,700 MT). For 2018/2019, net sales of 574,200 MT reported for Mexico (577,700 MT), were partially offset by reductions for Peru (3,500 MT). Exports of 489,800 MT were primarily to Mexico (171,900 MT), Colombia (115,200 MT), Japan (69,500 MT), Honduras (39,500 MT), and Peru (35,400 MT).
Optional Origin Sales:For 2017/2018, new optional origin sales of 60,000 MT were reported for unknown destinations. Options were exercised to export 54,000 MT to unknown destinations from other than the United States. The current optional origin outstanding balance is 242,000 MT for unknown destinations (174,000 MT) and South Korea (68,000 MT).
Barley: No net sales were reported for the week. Export of 2,000 MT--a marketing-year high--were unchanged from the previous week and up noticeably from the prior 4-week average. The destination was Japan.
Sorghum: Net sales of 308,100 MT were up 9 percent from the previous week and up noticeably from the prior 4-week average. Increases were reported for unknown destinations (251,000 MT) and China (57,100 MT, including decreases of 4,400 MT). Exports of 104,100 MT were up noticeably from the previous week and from the prior 4-week average. The primary destinations were China (102,000 MT) and Mexico (2,100 MT).
6. Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS prices are stronger this week with increased feed demand in the U.S. and Asian buying interest supporting prices. FOB ethanol plant prices have worked their way $6/MT higher in the past two weeks; the onset of winter across the Midwest is boosting feed demand. FOB ethanol plants DDGS values are 39 percent of Kansas City soybean meal, higher than last week, and the per-protein unit of DDGS is $1.66 less than soybean meal.
CIF NOLA barge prices are higher due to issues in parts of the river system, including stoppages on the Ohio river due to higher water. CIF NOLA prices rose $6.50/MT this week to their last quote at $170/MT. FOB NOLA prices are also higher as players with long positions or product to sell raise asking prices in response to demand-boosting news from Asia. FOB NOLA prices are up $7/MT to $182.25 as of their last quote.
Internationally, the Asian market continues to firm with noted buying support. Prices to China and Vietnam are up $2-3/MT while other destinations saw lower bids. On average, 40-foot containers to Southeast Asia were steady this week at $202/MT. Early week buying was attributed to President Trump’s visit to Asia that was expected to improve trade relations while late-week price increases were due to announced tax/tariff changes in the region.
7. Country News
Argentina: President Mauricio Macri is pushing legislation that would allow farmers to deduct the cost of fertilizer from their taxes. The goal is to expand corn production and end over-reliance on soybeans. Corn exports have grown 50 percent under Macri. There will also be greater investment in irrigation and more royalties paid for seeds in order to advance the genetics that are used. The goal is to boost corn production by 37 percent by 2025. (Bloomberg)
Brazil: To reduce the need for idling plants between sugarcane harvests, more “flex mills” will be built so that corn can be used during the intervening months as an ethanol feedstock. (Reuters)
China: The Foreign Ministry announced that although antidumping duties would remain in place, the value added tax (11 percent) would no longer be applied to imported DDGS. Meanwhile, the State Development and Investment Corporation signed an agreement to construct a 600 KMT ethanol plant in northeastern Heilongjiang province that will consume 1.85 MMT of corn each year. (Reuters)
South Sudan: Sorghum and maize prices are 281 percent higher than last year as a result of the bloody civil war occurring in the country’s green belt production area. (Reuters)
9. Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: There really is not much new to say about current global ocean freight markets. This week Dry-Bulk markets have been characterized as “trading in a narrow range.” This simply means that things aren’t moving much, and we have reached a bit of a stalemate between buyers and sellers in a market without many features. Thus, rates are mostly unchanged.
U.S. Gulf and PNW grain vessel lineups are diminishing from past weeks and there is not any robust demand out of the East Coast of South America. The only market on fire has been the small coaster market in the Black Sea where rates have gotten outrageously high ($40-plus per MT regionally) due to a shortage of small 2-3,000 MT vessels.
The charts below represent YTD 2017 versus 2016 annual totals for container shipments to South Korea.