Outlook: U.S. corn planting has advanced swiftly and may result in 50 percent of the ground being planted by 1 May. Additionally, more land may be getting planted to corn than USDA anticipated. All of this suggests a very large 2010/11 crop. Meanwhile, China will auction off yet another 1.3 MMT of its corn reserves, making for the third consecutive week of +1 MMT of reserve sales into its domestic market. The only bullish signal is the rumor of cold weather in northeast China that could delay corn planting. A soy/corn ratio of 2.8/1.0 heavily favors soy and corn cannot break further until/unless soybeans do.
CBOT MAY CORN FUTURES
Current Market Values:
U.S. WEATHER/CROP PROGRESS
Through April 26, a storm system will bring light to moderate amounts of rain and mountain snow (0.50 to 1.5 inch liquid equivalents) to much of the West early in the period, and trigger showers and thunderstorms thereafter as it slowly moves eastward to the Atlantic coast. Rainfall should be heaviest (2 to 4 inches) across the lower Mississippi, Tennessee and lower Ohio Valleys, providing much needed relief for the drought areas. Beneficial rainfall amounts between 0.50 and 1.50 inches are predicted for the areas of abnormal dryness and moderate drought across the eastern Great Lakes region. Unfortunately, little or no rain is forecast for the drought areas of the upper Midwest and upper Great Lakes region. Although temperatures will start off relatively mild in the East, near to below-normal temperatures will overspread the country from west to east.
From April 27 - May 1, above-median precipitation is predicted across much of the West and Northeast. Below-median precipitation is expected over most of the Mississippi Valley and eastern portions of the Great Plains. Below-normal temperatures will occur across much of the East and Southwest, while above-normal temperatures can be expected across the northern Rockies and High 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 1,481,000 MT for delivery in 2009/10 were up 47 percent from the previous week and 56 percent from the prior 4-week average. Increases were reported for South Korea (494,500 MT, including 143,200 MT switched from unknown destinations), Japan (336,900 MT, including 13,900 MT switched from unknown destinations), Cuba (151,100 MT), Mexico (133,800 MT), unknown destinations (69,800 MT), and Saudi Arabia (63,500 MT, switched from unknown destinations). Decreases were reported for Venezuela (12,600 MT). There were no sales reported for delivery in 2010/11. Exports for own account were reported for Mexico (4,800 MT). Exports of 1,155,700 MT were up 4 percent from the previous week and 6 percent from the prior 4-week average. The primary destinations were Japan (319,500 MT), Mexico (235,100 MT), South Korea (146,800 MT), Taiwan (97,100 MT), Saudi Arabia (63,500 MT), and Cuba (51,100 MT).
Barley: There were no sales reported during the week. Exports of 400 MT were to Mexico.
Sorghum: Net sales of 59,600 MT were reported for Morocco (25,000 MT), Mexico (23,700 MT), and Japan (17,000 MT, including 6,100 MT switched from unknown destinations). Decreases were reported for unknown destinations (6,100 MT). Net sales of 10,200 MT for delivery in 2010/11 were for Mexico. Exports of 66,400 MT were to Mexico (43,300 MT) and Japan (23,100 MT).
FOB
DISTILLERS DRIED GRAINS WITH SOLUBLES (DDGS)
The DDGS market has been strong this week, especially for the nearby delivery period of April-May. There seem to be two main causes for the tightness in DDGS supplies nearby. Oone is the lack of inventory caused by the ethanol plant downtimes in the last month, and the second cause has been the surge in demand for China and other bulk exports. The bulk ocean freight has been at a discount to container freight for DDGS to Asia for about the last two months. This has increased the demand for bulk, which has a different purchasing pattern than containers. (Bulk tends to have large purchases over short periods of time, then slack demand, then another large purchase.) Container business is usually a steady stream of small purchases every day or week.
Regarding ethanol production and margins, this situation is expected to improve by mid-summer pending some legislation and resolution of issues restricting ethanol demand with the EPA. Some sources have suggested that this could be resolved as early as June of this year, and if this is true we will see resurgence in production of DDGS and a growing need for export demand. Furthermore the sudden surge in soybean meal prices has been very supportive of the rapid surge in DDGS use in the feed rations as a cheaper protein source. (See SBM chart below).
Exports:
- The demand for bulk shipments to Asia and other destinations has pulled DDGS from as far west as Nebraska to the Mississippi river. This has created some confusion and unusual price spreads between the ethanol plants in the Midwest and the California Dairy markets or the PNW. Reports from the trade confirm substantial volumes of barge trade that reflect earlier reports of DDGS sales to China of about 150,000 mt for June.
- Inversely, the container market has been very quiet because of the increase in bulk shipments of DDGS. There was some talk that the container lines will begin to lower rates in line with bulk freight to regain that share of the market as opposed to shipping empty containers.
- Mexican demand was noted as slower than normal this week, with buying coming mainly from the cattle sectors south of the border.
Domestic:
- Poultry demand has been slow the in last few weeks so some sources suggest that another round of buying is forthcoming.
- Dairy demand for DDGS has picked up as well in light of canola meal imports being restricted at the border due to quality problems involving Salmonella
COUNTRY NEWS
Argentina: FOB levels continue to be surprisingly strong with a June shipment priced at +60cN FOB upriver, which makes it more expensive than American corn. Sorghum is also making noise despite tannin levels at 1 percent above U.S. levels. Japan in particular has taken an interest. A May shipment was traded at -90cK and while sellers prefer to get -60cK, buyers are holding to the earlier trade level.
Brazil: Some corn may move in local markets in June/July but exports begin in August and already a panamax was sold for that shipping period to Taiwan at $178/MT FOB.
Canada: The Canadian dollar moved ahead of the U.S. dollar ($1.007) for the first time in two years, likely shifting even more shopping to south of the border.
EU: More than 2.7 million tons of barley has been brought into intervention stocks since November, and another 2.1 million tons are under offer
India: The government is considering re-establishing quantitative restrictions on imports that had been removed nearly a decade ago.
Indonesia: Indonesian feed mills bought 120,000 tons of South American corn.
Russia: Interior corn and barley prices softened a bit and one problem is infrastructure. Although Russia has the capacity to export 25 MMT, poor grain terminal facilities on the Black Sea keep it to only 10 MMT. Thus building and modernization began recently at the Novorossiysk and Tuapse facilities.
OCEAN FREIGHT MARKET AND SPREADS
OCEAN FREIGHT COMMENTS
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: It’s still a bit of a roller coaster ride for freight markets. Fortunately it is not too rough of a ride. World ocean freight markets are still searching for direction and the market movements over the last three weeks have not been very dramatic in either direction. After a small uptick in rates last week the market dropped back again this week. As we sit here at the end of the week things are feeling pretty soft and demand does not appear to be keeping up with ship supply. Brazilian freight to Asia remains a slight premium to the U.S. Gulf, with Up River rates at about a $9.00 premium. As the Panamax freight market declined the spread to Handysize has widened out.
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: $10.50-$11.00
Three weeks ago: $10.00-$10.50
One week ago: $9.60- $9.90
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 $69.00/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 $30.00/tonne. (.76/bushel for corn and .81/bushel for wheat and soybeans).
INTEREST RATES
