Outlook: U.S. corn prices will be pressured lower for the rest of the marketing year by the abundant corn crop in South America.  There was anticipation about the March WASDE this week but the next potential influence on the trading current range is the 31 March planting intentions report.  Current wet, cool conditions are still just a background situation and NOAA expects the El Nino to hang around for a while, which greatly lessens the potential for a drought in the U.S. this summer.  Though a continued El Nino would increase the likelihood of extended drought conditions in Southeast Asia.

CBOT MARCH CORN FUTURES

Current Market Values:

U.S. WEATHER/CROP PROGRESS

U.S. Drought Monitor Weather Forecast:  Moderate to isolated heavy precipitation is anticipated through March 15, 2010 for northern California, the Big Bend of Texas, the new dry area in the interior Southeast, central and northern Michigan, and northern Wisconsin. Light precipitation should fall on most other current areas of dryness and drought, with little or none expected in southern Texas, the desert Southwest, or southern California. From March 16 - 20, the odds favor wetter than normal conditions in southern Texas, and closer to normal precipitation in Washington, northwestern Oregon, and the southern Big Bend of Texas. All other current areas of dryness and drought should receive below-normal precipitation.  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 338,600 MT for delivery in 2009/10 were down 56 percent from the previous week and 53 percent from the prior 4-week average.  Increases were reported for Japan (163,400 MT), Egypt (109,700 MT, including 91,700 MT switched from unknown destinations), Taiwan (104,300 MT), Venezuela (42,100 MT), Costa Rica (27,900 MT, including 26,200 MT switched from Guatemala), Mexico (24,100 MT), and Canada (7,300 MT). Decreases were reported for unknown destinations (94,100 MT), the Dominican Republic (24,900 MT), and Peru (23,000 MT).  Net sales of 300 MT for delivery in 2010/11 were for Canada.  Exports of 964,800 MT were down 9 percent from the previous week, but up 9 percent from the prior 4-week average.  The primary destinations were Japan (330,100 MT), South Korea (164,700 MT), Mexico (157,000 MT), Egypt (91,700 MT), Taiwan (71,600 MT), Costa Rica (52,400 MT), and Colombia (27,300 MT). 

Barley: There were no sales reported during the week.  Exports of 200 MT were to Mexico. 

Sorghum: Net sales of 74,900 MT were for Mexico (51,900 MT), unknown destinations (14,700 MT), and Japan (8,300 MT).  Exports of 32,600 MT were mainly to Mexico (27,400 MT) and Japan (5,100 MT).

FOB

DISTILLER'S DRIED GRAINS WITH SOLUBLES (DDGS)

DDGS prices continued their decline, following the trend in corn and soymeal futures.  The seasonal impact of available forage is also limiting domestic cattle and dairy feed demand in the southwest and western states. Production for DDGS is expected to be up about 8-9% this year over last year, within the range of 28-30 mmt depending on the analyst and the conversion rates used for DDGS production as a percent of corn processed by dry milling. We anticipate that about 1 million metric tons of additional exports will need to be added each year for the next three years to sustain prices near real feeding values for DDGS.

Domestic:  Poultry demand has been quiet; however it has been the pattern to buy for 2-3 months at one time so it is not unusual to have lags in purchasing during the interim. Prices FOB Midwest ethanol plants range from $100-110.00 short ton or from $110-$120.00 mt.

Exports:  Exports were up 84% for January 2010 over January 2009, with 18% of that total going to China, or about 101,000 mt.  Mexico has been a steady buyer of DDGS this week, with no significant changes. Canada reportedly did some buying for the Lethbridge region. Container business to Asia has been slower than normal for this time of the year, with exporters noting the low levels of sales compared to last year at this time. Container availability does not appear to be the main cause of the problem, just slow demand perhaps caused by non U.S.-origin competing ingredients such as canola, feed wheat and others.

COUNTRY NEWS

Argentina:  Buyers are willing to pay high 30s over the Chicago May price while sellers are seeking low 40s for March shipment.  Even higher prices are bid/offered based on panamax movements.  High moisture conditions continue and about three percent of the crop is harvested. 

Chile:  Ports were damaged as a result of the 27 February earthquake.  Discharge is limited to containers at some ports and silos were damaged.  However, Chile does not need to import corn at this time due to the availability of domestic production.

Russia:  Feed wheat and corn prices softened but barley prices declined significantly (-$1.50/MT to $80/MT) in Central Russia and the Black Sea region.

India:  Corn is the lower priced feed grain and poultry growers have increased its share in the ration to 60-61 percent, versus 52-55 percent last year.  Feed costs have been steady but demand for poultry has enabled firm profits for poultry farms.

Southeastern Europe:  Farmers should start planting corn in the coming weeks, with acreage in Bulgaria expected to be unchanged from last year at around 300,000 hectares. Analysts expect Romania to raise corn area by five percent in 2010.

Ukraine:  Feed grain prices strengthened around $1/MT with $185/MT FOB Black Sea corn prices.  There is hope that VAT rebates will resume soon as that would add stimulus to export selling

Uruguay:  A 36,000 MT FOB export sale of corn was made at 20 cents/bushel over Chicago May prices (about $155/MT flat price basis).

OCEAN FREIGHT MARKET AND SPREADS

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OCEAN FREIGHT COMMENTS  

Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting:  Due to my travel schedule this report is coming to you one day early.  It has been a wild two-week period in the freight markets. And it has been more than a little perplexing. I can’t say that there has been a big increase in demand for vessels, but it does seem that the demand that exists is not finding a sufficient amount of offers, so the market has gotten a bullish attitude. The market has had some momentum and vessel owners are willing to let it run.

We have seen good demand for both Capes and Panamax vessels in the Atlantic coal market.  Indian coal shipments have been good and we are in the troughs of the South American Soybean harvest. All of this does bring demand to the market. Capesize and Panamax vessels have led the way with Handymax and Handysize vessels lagging the rise.  It will be interesting to see how long this rally can last.

 The market inverse has dissolved and the freight markets are fairly flat going out 60 days

 

 

  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:           $9.15-$9.50

Three weeks ago:         $9.00-$9.25

One week ago:              $10.50- $11.00

This week                    $10.50- $11.50(Up $.50/mt from last week).

 

In dollar terms, the current spot and 30-day U.S. Gulf to Japan Panamax market is currently near $68.00/mt.  The 30-day Panamax rates from the PNW to Japan are approximately $43.00/mt.  The PNW/Gulf freight spread to Asia is approximately $27.00/tonne (.69/bushel for corn and .73/bushel for wheat and soybeans). The spreads however are narrowing and the PNW advantage is very small now.

 

  

* 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

 

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