Outlook: Corn planting intentions were an inconsequential 400,000 acres less than the average trade guess (-0.4 percent). The trade believes this number will rise as June gets closer. Corn stocks were 190,000 bushels greater than the average trade guess (+2.4 percent). The Midwest weather outlook can be read to suit the bias of either bulls or bears but the bottom line is that the world is well supplied with feed grains.
During the first three months of 2010, May corn has dropped -$0.74/bushel or down 17.3 percent. By contrast, oil is down just 3.1 percent with stable supplies and weak demand. As market analyst Dave Marshall told Dow Jones, corn has been “one of the worst investments in the world the past three months.” Funds might have found equities more rewarding than commodity markets this past quarter, and they may do something about it in coming weeks
CBOT MAY CORN FUTURES
Current Market Values:
U.S. WEATHER/CROP PROGRESS
Moderate rainfall is expected across portions of the central Great Plains and the middle Mississippi Valley between March 31 and April 5, 2010. Additional heavy rains are expected across the Pacific Northwest, with storm systems moving from the north Pacific into the northern Rockies. Beyond April 5, wetter than normal conditions are expected across the Pacific Northwest, Great Lakes, lower Mississippi Valley, and into the Northeast. 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 826,100 MT for delivery in 2009/10 were up 36 percent from the previous week and 35 percent from the prior 4-week average. Increases were reported for Japan (323,000 MT, including 87,700 MT switched from unknown destinations and decreases of 1,800 MT), South Korea (171,300 MT, including 57,800 MT switched from unknown destinations and decreases of 2,300 MT), Mexico (104,600 MT), Venezuela (95,300 MT), Taiwan (59,300 MT), Egypt (50,600 MT), and Lebanon (40,800 MT, including 21,000 MT switched from Egypt and 19,000 MT switched from Syria). Decreases were reported for unknown destinations (126,600 MT) and Syria (12,300 MT). Net sales of 400 MT for delivery in 2010/11 were for Canada. Exports of 1,214,600 MT were up 5 percent from the previous week and 18 percent from the prior 4-week average. The primary destinations were Japan (306,000 MT), Mexico (201,000 MT), South Korea (174,000 MT), Egypt (103,100 MT), Syria (95,700 MT), Taiwan (67,100 MT), and Venezuela (60,800 MT).
Barley: There were no sales reported during the week. Exports of 200 MT were to Mexico.
Sorghum: Net sales of 13,300 MT were for unknown destinations (10,200 MT) and Mexico (3,500 MT). Decreases were reported for Morocco (300 MT) and Canada (100 MT). Exports of 44,400 MT were to Mexico (29,500 MT), Japan (8,100 MT), Morocco (6,700 MT), and Canada (100 MT).
FOB
DISTILLERS DRIED GRAINS WITH SOLUBLES (DDGS)
DDGS Prices are stable to better this week in a few locations. The main reasons appear to be growing export demand and reduced DDGS production due to poor ethanol margins. There are several major price divergences occurring that should correct themselves in due course. The first divergence is the price of gasoline relative to ethanol (see chart 1, below). This can be attributed to over capacity in the ethanol industry and cheaper grain prices. The second divergence is between container freight and bulk freight rates (see chart 3, below). The price spread between the U.S. Gulf and Asian destinations for container rates has increased to near $100.00/metric ton whereas bulk freight is closer to $70.00 mt for DDGS.
We are also hearing of strong demand from China, as U.S.-origin DDGS prices relative to corn and soybean meal prices there are substantially lower. The demand for bulk business to China and other Asian destinations has picked up accordingly in the last few months. Shipments from Gulf and Pacific Northwest ports are on the rise.
Ethanol processing margins have improved to profitable this week from unprofitable last week, but only marginally.
Exports:
- Demand for bulk DDGS via rail cars to the Pacific Northwest is solid and growing.
- Mexico business is steady.
- Asian bulk and container demand is strong.
Domestic Markets:
- California truck business has been firm with about 200K tons in the last few weeks.
- Idaho has had some increase in demand but we hear this is largely due to an ethanol plant there being down for maintenance.
- Nothing much is new with East Coast poultry buyers.
COUNTRY NEWS
Argentina: Corn has gone from 25 cents over Chicago May to a trade this past week supposedly at 53 cents over, which makes U.S. corn more competitive. The strike by longshoremen which had been blocking the movement of 100,000 MT of soy each day was settled, though some argue it could have long term impacts on buyers’ attitudes toward the country’s reliability as a supplier of grains.
India: Russia is trying to show independence when it comes to meat suppliers and has mentioned both India and Turkey as alternatives to western hemisphere product. The quid pro quo being that Russia would supply the feed.
Japan: Nekkei reports a survey showing that 40 percent of food-selling firms intend to lower their prices.
Kenya: Corn is king in East Africa but some are arguing it should return to its traditional sorghum and millet crops that are more suitable than water hungry maize under global warming.
Russia: The government sold 1,890 tons of corn out of intervention for a total sale value of $269,191. Prices ranged from $142-195/MT for a $169/MT average; $168/MT is the average interior grain terminal price. Ukrainian officials report that Russia is seeking corn and barley from their country in order to grow the Russian livestock industry.
Turkey: A regulation must now be drafted for enforcing the country’s new biosafety law, which is intended to mimic EU requirements. Adequate feed supplies will remain a concern as meat prices have been climbing.
Ukraine: Feed grain prices firmed under active buying, all rising about $1/MT (corn at $175/MT FOB), though there are still concerns about the lack of a VAT rebate.
Uruguay: Environmentalists are expressing concern about the amount of agricultural chemicals being used on corn, sorghum and other crops, claiming it detracts from the nation’s adopted motto: Uruguay, pais natural” (Uruguay, A Natural Country).
OCEAN FREIGHT MARKET AND SPREADS
OCEAN FREIGHT COMMENTS
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: Due to the Good Friday CME holiday, this report is being issued on Thursday night. This is not an April Fool’s joke, but most of the week’s market action was down. On Tuesday the Baltic P2A Panamax index in the Atlantic dropped to 41,619 before staging a small rally back up to 42,131 on Thursday. Activity in the Pacific was similar. It has largely been a case of new ship deliveries outpacing demand growth, especially in the Capesize market where 50 new vessels were delivered in March.
The overall market question remains the same; how fast will Chinese demand for raw materials grow relative to the growth in the world vessel fleet? China has certainly been doing their part in the balancing game. In December the Chinese GDP was projected to increase by 8% in 2010; now that figure is 11-12%. Banks however are projecting more market volatility and tougher sailing for vessel owners as we move into the second and third quarter of 2010.
The market slipped an additional 4-5% week over week. The freight market is 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: $10.75-$11.50
Three weeks ago: $11.00-$11.50
One week ago: $10.50- $11.00
This week $10.00- $10.50(Down slightly from last week).
In dollar terms, the current spot and 30-day U.S. Gulf to Japan Panamax market is currently near $67.00/mt. The 30-day Panamax rates from the PNW to Japan are approximately $40.00/mt. The PNW/Gulf freight spread to Asia is approximately $27.00/tonne.
INTEREST RATES
