Outlook: The Obama Administration’s proposal to bar commercial banks from investing in hedge funds would have a large impact on commodities, since many of these institutions have diversified their portfolios by buying into commodities. A few may drop their commercial status and return to solely the investment banking category, preserving their ability to own commodities, but it would still suck some liquidity out of the markets.
Weak longs will get chased out of this market and prices will stabilize, but if commodities lose their attraction for the investor crowd, even if only temporarily, a return to traditional floor levels will be found.
Buyer attention now shifts to South America but LH Jan through FH March has the annual spectacle of the battle for acres in North America. With global ending stocks of wheat (30.3% stocks/use ratio [STU]) and soybeans (25.5% STU) higher and coarse grains lower (16.3% STU), the 2010/11 U.S. maize crop is expected to fare well in this annual shoot-out with the Informa estimate at 89.6 million acres (+4.2%).
CBOT MARCH CORN FUTURES
Current Market Values:
U.S. WEATHER/CROP PROGRESS
U.S. Drought Monitor Weather Forecast: Through January 25, an active weather pattern is expected as a series of storms track across the western and southern tiers of the country, and then up the Atlantic Seaboard. This is consistent with wintertime El Niño conditions. Latest precipitation forecasts call for widespread areas of 2 inches or more liquid equivalent precipitation (with locally heavier amounts) impacting much of California and Arizona during the next three days, and more wet weather for the Southeast during the next 5 days. Lighter precipitation is expected across the upper Midwest, with drier conditions expected in southeastern Texas.
The forecast from January 26-30 calls for above-normal precipitation for the western third of the Nation, especially California and the Great Basin, the central Plains, the lower Missouri and Ohio Valleys, and eastern Great Lakes Region. Subnormal precipitation is expected for the northern Great Plains, southwestern Texas, the eastern Gulf and southern Atlantic Coasts, and Alaska. Temperatures are predicted to be subnormal in the North-Central States and southern Florida, while above-normal readings are forecast for the Pacific Northwest and New England. 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 of 1,610,400 MT for delivery in 2009/10--a marketing-year high--were up noticeably from the previous week and from the prior 4-week average. Increases were reported for unknown destinations (408,600 MT), Japan (290,700 MT, including 70,600 MT switched from unknown destinations and decreases of 94,500 MT), South Korea (268,500 MT), Taiwan (173,400 MT, including 25,400 MT switched from Japan), Egypt (149,800 MT, including 29,800 MT switched from Taiwan), Mexico (113,600 MT), Guatemala (58,100 MT, including 18,500 MT switched from unknown destinations), and Saudi Arabia (45,000 MT). Net sales of 400 MT for delivery in 2010/11 were for Mexico. Exports of 835,900 MT were up 27 percent from the previous week and 22 percent from the prior 4-week average. The primary destinations were Japan (232,400 MT), South Korea (159,600 MT), Mexico (148,500 MT), Syria (78,200 MT), Ecuador (30,400 MT), and Egypt (29,800 MT).
Barley: There were no sales reported during the week. Exports of 200 MT were to Taiwan.
Sorghum: Net sales of 75,600 MT were primarily for Mexico (75,100 MT) and Japan (6,100 MT, including 5,700 MT switched from unknown destinations). Decreases were reported for unknown destinations (5,700 MT). Exports of 58,300 MT were to Mexico (41,200 MT), Japan (17,000 MT), and Canada (100 MT).
FOB
DISTILLER'S DRIED GRAINS WITH SOLUBLES (DDGS)
DDGS prices and trade volume are lower this week, following the weaker trends in agricultural commodities. Overall ethanol plant margins remain positive so supply continues to be strong. On the quality side there are continued challenges with mycotoxins ,especially DON/Vomitoxin, however we understand that there are many suppliers that can offer a max 5 PPM for Vomitoxin on DDGS for exports in contract. If this is a concern, you can put it in your agreement with suppliers.
Domestic: Local truck prices are $85-90.00 ton this week FOB Iowa and Minnesota. Prices still weak due to a lack of logistical support for rail exports.
Exports: Container shipment out of Chicago and some other areas are still running late due to the weather and backlog from last month.
The CIF Nola demand has been good this week as reported by a broker. Chinese demand remains strong and their reduced crop size will likely make DDGS a good alternative.Export demand from Mexico has been strong this week, with a higher volume of trade than in recent weeks.
COUNTRY NEWS
Argentina: Continuous rains bolster crop prospects, with corn production estimates ranging from 16 MMT to 20 MMT, with the BA Grain Exchange splitting the difference and calling it 18 MMT (3 MMT above the USDA Jan WASDE). Though prices dropped (from $190s/MT upriver to $173/172/MT), buyers (particularly Peru) are willing to pay a $10/MT premium for Argentine origin. New crop and panamax scale shipping are gaining interest.
Spain: There is still a lot of old crop demand to cover here and in other Mediterranean spots, but buyers believe that heavy stocks still have room to push feed prices lower.
Russia: Officials said intervention will end this month and up to 30,000 tons of grain may be exported; the minimum price for corn from intervention is $141.60/MT.
Ukraine: Feed wheat and barley prices were unchanged this past week. The corn market was quite active but export prices remained stable at $185-189/MT FOB Black Sea. Buyer interest has actually slowed due to a hike in freight rates.
OCEAN FREIGHT MARKET AND SPREADS
OCEAN FREIGHT COMMENTS
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: World ocean freight markets continued to slide this week. There was a small adjustment to the up side on Thursday, but it was not enough to bring values back to last week’s close. There is not much to report this week so it will be a short report. I’m calling the Atlantic and Pacific markets down about $1.00-$1.50/mt this week, but have heard of U.S. Gulf to Japan fixtures that were at or below $68.00.
World freight markets remains inverted out to February and 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: $10.55-$10.75
Three weeks ago: $12.50-$12.90
One week ago: $12.25-$12.50
This week $12.00- $12.25 (Down slightly from last week).
In dollar terms, the current spot and 30-day U.S. Gulf to Japan Panamax market is currently near $68.50/mt. The 30-day Panamax rates from the PNW to Japan are approximately $39.00/mt. The PNW/Gulf freight spread to Asia is approximately $29.50/tonne (.75/bushel for corn and .80/bushel for wheat and soybeans).
* Fob vessel Soybeans offers are thin from the PNW. It is therefore extremely difficult to determine an accurate soybean market spread to the US Gulf. PNW fobbing capacity for January and February is largely committed and therefore tight. Corn quality is a significant challenge for all vessel loaders.
INTEREST RATES
