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 pockets of heavy precipitation are anticipated from March 17-22, 2010 across portions of the Northern and Central Rockies, Great Plains, Upper Midwest, Great Lakes, and Southeast. Light precipitation is forecast for most of the country east of the Rockies, with most of the precipitation forecast to fall outside of the currently depicted drought areas. From March 23-27, the odds favor drier than normal conditions across much of the contiguous 48 states. Wetter than normal conditions are favored along the gulf coast, eastern seaboard and Lower Great Lakes. 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 747,600 MT for delivery in 2009/10 were up noticeably from the previous week and 21 percent from the prior 4-week average. Increases were reported for Japan (424,800 MT, including 114,700 MT switched from unknown destinations and decreases of 15,400 MT), South Korea (413,200 MT, including 239,100 MT switched from unknown destinations), Taiwan (193,300 MT), Mexico (110,000 MT), Saudi Arabia (54,500 MT, switched from Egypt), Peru (28,300 MT, including 15,000 MT switched from unknown destinations), and the Dominican Republic (18,300 MT). Decreases were reported for unknown destinations (446,000 MT), Colombia (61,600 MT), Egypt (34,900 MT), and Guatemala (17,600 MT). There were no sales reported for delivery in 2010/11. Exports for own account were reported for Mexico (8,100 MT). Exports of 955,300 MT were down 1 percent from the previous week and 2 percent from the prior 4-week average. The primary destinations were South Korea (231,900 MT), Japan (184,500 MT), Mexico (159,700 MT), Saudi Arabia (54,500 MT), Venezuela (44,500 MT), Peru (40,300 MT), and the Dominican Republic (37,300 MT).
Barley: There were no sales reported during the week. Exports of 400 MT were to Canada.
Sorghum: Net sales of 40,900 MT were for Japan (34,600 MT, including 4,200 MT switched from unknown destinations) and Mexico (10,500 MT). Decreases were reported for unknown destinations (4,200 MT). Exports of 26,900 MT were to Mexico (13,800 MT) and Japan (13,100 MT).
FOB
DISTILLER'S DRIED GRAINS WITH SOLUBLES (DDGS)
The DDGS market has reached a good price support level, with some ethanol plants taking time for maintenance. FOB factory Midwest prices are at $80-90.00 per short ton, which is well below corn values and therefore a good buy for livestock producers. The reduced ethanol/DDGS production may raise DDGS prices in the near term relative to corn prices.
In the domestic market there has been some volume traded to the California Dairy market in the range of 100-125,000 mt for April/May delivery.
Exports: Asian container business has been steady this week and supportive for prices. The past few weeks have been slower than normal so this is a positive sign for export demand. Mexican demand has been good as well, although we would not characterize it as above the normal sales volume.
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
OCEAN FREIGHT COMMENTS
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: Due to my travel schedule this report is again coming to you one day early. It was another week of higher freight values. The market was partially supported by bad weather in Australia’s coal and Iron Ore ports that backed up loading operations. Tropical cyclone Hamish closed the McArthur, Hay Point and Dalrymple ports, causing backups of 85 vessels.
Indian coal exports, China’s continued strong demand for raw materials and the South American Grain harvest remain the driving factors in this market. As mentioned previously, China has been stockpiling Iron Ore and those reserves are now estimated to be close to 17 million mt. How much longer this stockpiling policy will continue is unknown.
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: $9.00-$9.25
Three weeks ago: $10.50-$11.00
One week ago: $10.75- $11.50
This week $11.00- $11.50(Unchanged from last week).
In dollar terms, the current spot and 30-day U.S. Gulf to Japan Panamax market is currently near $71.00/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 $28.00/tonne (.71/bushel for corn and .76/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
