Outlook: Last week, managed funds increased their net short positions in corn from 7,000 contracts to 30,000 contracts. Non-commercial players in the market are very bearish. That is in contrast to the optimism of economic recovery shown in the stock market, and a recovery is good for grain consumption. Commercial hedgers are likely looking at other considerations, such as whether U.S. corn yields will match last year’s 165 bushels/acre, or be closer to the trend line of 160? The difference is 3 percent on production but potentially 25 percent on 2010/11 ending stocks–assuming no change in the demand forecast. The resulting lower price could spark some additional demand but ending stocks would likely still rise. Livestock expansion this year will be significant and global corn stocks are historically tight–though forecast to grow. Some go “all in” on a market trend, others will be watching area, yields, economic growth and other fundamental factors.
CBOT MAY CORN FUTURES
Current Market Values:
U.S. WEATHER/CROP PROGRESS
Through April 19, a cold front over the Nation’s midsection will slowly move east, triggering showers and thunderstorms from the southern and central Plains across the Midwest and into the Northeast. Rainfall should be heaviest across the southern third of the Plains (2 to 3 inches) where the front should stall, while much lower amounts occur in the Midwest and Northeast. Little or no rain is expected in the lower Delta and Southeast, northern Plains, and upper Midwest. Temperatures will be above normal in the West, northern Plains, and upper Midwest, and seasonable to subnormal in the southern Plains, South, and Northeast.
From April 20-24, a change in the short-term forecast is expected, with subnormal temperatures and above-normal precipitation predicted for most of the West, especially the Southwest. In the northeastern quarter of the Nation, both subnormal precipitation and temperatures are expected, while above-normal temperatures will occur from the lower Delta northwestward into the northern Plains. 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 1,006,300 MT for delivery in 2009/10 were down 26 percent from the previous week, but up 14 percent from the prior 4-week average. Increases were reported for Japan (420,800 MT, including 88,700 MT switched from unknown destinations and decreases of 17,300 MT), Mexico (213,200 MT), South Korea (165,900 MT), Egypt (71,500 MT, including 65,500 MT late reporting) Venezuela (34,100 MT), and Taiwan (32,900 MT). Decreases were reported for Guatemala (17,200 MT) and the French West Indies (4,000 MT). Net sales of 140,900 MT for delivery in 2010/11 were mainly for Mexico (139,900 MT). Exports of 1,113,100 MT were up 27 percent from the previous week and 6 percent from the prior 4-week average. The primary destinations were Japan (343,100 MT), Mexico (288,000 MT), South Korea (171,600 MT), Egypt (97,300 MT), Taiwan (96,100 MT), and Costa Rica (30,300 MT).
Barley: Net sales of 300 MT were for Canada. Exports of 1,400 MT were to Canada.
Sorghum: Net sales of 46,400 MT were for Mexico (46,000 MT) and Japan (400 MT). Exports of 66,400 MT were to Mexico (48,100 MT) and Japan (18,300 MT).
FOB
DISTILLERS DRIED GRAINS WITH SOLUBLES (DDGS)
DDGS prices are firmer again this week, and at the risk of being redundant, the main reason for this is China. This all centers around the news that about 200,000 to 250,000 mt have been sold in bulk there in recent weeks from either the U.S. Gulf or the PNW. The usual demand is of course still under the market but if DDGS prices move high enough then feed millers will price it out of the rations, once again limiting the upside potential. Further supporting the market for DDGS this week was the price rise in soybean meal (see chart below), which has been serendipitous for the ethanol plants that buy corn and sell ethanol and DDGS. The world feed grain market remains a bit bearish due to all of the spring feed wheat being harvested and sold in the weeks and months ahead. The petroleum market has been firm but has faltered late in the week.
Most of the DDGS traders are at the annual California Feed and Grain Conference this week so there is not much in terms of market commentary to report, in fact the prices quoted above may be a day old so take that into consideration in your review of this issue.
COUNTRY NEWS
Argentina: There is no more spot corn and buyers are unwilling to pay prices amounting to $4.18/bushel for May.
Brazil: The corn crop estimated production was raised from 51 to 53.5 MMT and it is not currently competitive, as buyers must wait until August onward to find competitive terms and volumes.
China: There were aggressive bids for 500 KMT of corn put up by China out of its grain reserve. Domestic prices are rising and China might release another 1.38 MMT of corn from its reserves on 20 April. South China buyers are bringing in U.S. DDGs due to Beijing’s refusal to grant corn import licenses. (Note that CME will soon begin trading DDGs futures.)
India: Domestic corn prices ($213.75/MT) are down from their earlier peak but still 6 percent above 2009 prices. At the same time, the Rupee has climbed more than 11 percent in value versus the dollar since last year.
Russia: The ruble is strong and world grain prices are low, causing export prices for barley and corn to fall dramatically, though local prices have picked up.
Ukraine: Farmers need cash for spring planting and are offering up their stocks, which is causing grain prices to fall, though barley stayed stable at Black Sea ports. The higher value currency and lack of VAT news will keep it bearish.
OCEAN FREIGHT MARKET AND SPREADS
OCEAN FREIGHT COMMENTS
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: Without a doubt, we still live in volatile times. The market seems to be acting a bit like a yo-yo with one week up, the next down and then back up again. I guess this does tell us that the freight markets have not yet found a true course. This week was an up week in most freight markets. I did not hear news of a lot of new demand, just stories of sufficient demand to soak up the available offers. South American Grain business is increasing and China’s economy is growing at the expected rate. New vessels are being delivered but obviously their numbers have not yet exceeded the outstanding demand for freight.
All in all the markets really did not move too much. On Friday they gave the impression of maybe slowing down a bit or at least tiring out a little. The physical markets did not really follow the BDI index up this week. Brazilian freight to Asia remains a slight premium to the U.S. Gulf, with Up River rates at about a $9.00 premium.
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: $11.00-$11.50
Three weeks ago: $10.50-$11.00
One week ago: $10.00- $10.50
This week $9.60- $9.90(Down slightly from last week).
In dollar terms, the current spot and 30-day U.S. Gulf to Japan Panamax market is currently near $70.00/mt. The 30-day Panamax rates from the PNW to Japan are approximately $41.00/mt. The PNW/Gulf freight spread to Asia is approximately $29.00/tonne. (.73/bushel for corn and .79/bushel for wheat and soybeans). The spreads however are narrowing and the PNW advantage is very small now.
INTEREST RATES
