1. Chicago Board of Trade Market News
Outlook: USDA’s March 31 Planting Intentions report shocked the market and prompted an all-time record volume that day of 930,250 corn contracts traded. Funds were reportedly short 1 billion bushels. However, a 93.6-million-acre corn planting number is unsustainable. It includes proposed increases such as 24 percent more corn acres in dry, short-season North Dakota. The number will likely drop by one to two million acres and then there is the uncertainty of weather and yield. However, it would take an unlikely [emphasis] large yield drop to achieve a corn ending supply number less than the current marketing year. Only time will tell whether too many farmers were short-sighted in not better forward selling and thus hedging their 2016 crop.
Still, there are bargain hunters and the market has just managed five straight days of gains, climbing 10 cents on the May contract since last week’s bearish USDA report. Meanwhile, South America has been pricing its corn aggressively but heavy rains in Argentina have slowed harvest and getting corn to the ports, which has spiked the spot market.
3. U.S. Weather/Crop Progress
U.S. Drought Monitor Weather Forecast: The next 5 days (April 7-11, 2016) should feature a swath of moderate to heavy rain from central Kansas and eastern Oklahoma northeastward through the Ohio Valley, lower Great Lakes region, the Appalachians, and the Northeast. Totals are forecast to range from just under an inch to near 2.5 inches, with the largest amounts expected in and around central and southern Missouri, and across New England. Moderate precipitation is also anticipated in much of California, with at least half an inch forecast everywhere but the southeastern deserts and west-central sections of the state, and locally 1.5 to 3.5 inches in the higher elevations statewide. The southern half of Nevada and the higher elevations of Arizona are expecting 0.5 to locally 2.0 inches. In contrast, little precipitation is expected in the northern tier of the West and Rockies, along the High Plains, in the northern Great Plains, and near the Gulf of Mexico. Light to moderate amounts (up to several tenths of an inch) are expected elsewhere. It should be a warm 5 days for most of the Plains and central and northern sections of the Far West, with daily maxima averaging 10F to 15F above normal in the northern Intermountain West and adjacent Rockies. Conversely, unseasonably cold weather should dominate the East, with temperatures on average topping out 10F to 15F below normal from the upper Mississippi Valley, Great Lakes, and Northeast southward into the Ohio Valley, central Appalachians, and mid-Atlantic region.
The next 5 days (April 12-16, 2016) should bring drier than normal conditions to the Great Lakes, adjacent Midwest, and middle Mississippi Valley, but odds favor wetter-than-normal weather for a large swath of the nation, including the East (outside Florida), the Tennessee and lower Mississippi Valleys, much of the southern Great Plains, and all but the northern tier of the country from the High Plains to the West Coast.
Follow this link to view current U.S. and international weather patterns and the future outlook: Weather and Crop Bulletin.
4. U.S. Export Statistics
Corn: Net sales of 945,200 MT for 2015/2016 were up 20 percent from the previous week, but down 5 percent from the prior 4-week average. Increases were reported for Mexico (339,000 MT, including 30,000 MT switched from unknown destinations and decreases of 98,300 MT), Japan (220,300 MT, including 82,800 MT switched from unknown destinations and decreases of 31,200 MT), Taiwan (138,500 MT, including 65,000 MT switched from unknown destinations), Peru (84,500 MT, including 33,000 MT switched from unknown destinations), and Saudi Arabia (65,400 MT, including 65,000 MT switched from unknown destinations). Reductions were reported for unknown destinations (32,500 MT), Guatemala (3,300 MT), and South Korea (700 MT). For 2016/2017, net sales of 175,100 MT were reported for Japan (129,000 MT), Mexico (101,000 MT), and Guatemala (5,000 MT). Reductions were reported for unknown destinations (59,900 MT). Exports of 1,137,500 MT--a marketing-year-high--were unchanged from the previous week, but up 12 percent from the prior 4-week average. The primary destinations were Mexico (371,400 MT), South Korea (129,200 MT), Colombia (129,000 MT), Taiwan (82,900 MT), Japan (82,800 MT), Peru (66,700 MT), and Saudi Arabia (65,400 MT).
Optional Origin Sales: For 2015/2016, the current outstanding balance totals 398,000 MT, all unknown destinations.
Barley: Net sales of 100 MT for 2015/2016 were reported for South Korea. For 2016/2017, net sales of 1,100 MT were reported for Japan. There were no exports reported during the week.
Sorghum: Net sales reductions of 100 MT for 2015/2016 resulted as increases for China (160,600 MT, including 106,000 MT switched from unknown destinations) and Mexico (3,600 MT), were more than offset by reductions for unknown destinations (159,000 MT) and Pakistan (5,300 MT). Exports of 142,900 MT were down 37 percent from the previous week and 9 percent from prior 4-week average. The destinations were China (110,600 MT), Pakistan (29,800 MT), and Mexico (2,600 MT).
6. Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS prices were down on average $4/container but that was largely due to declines in the U.S. market. There was no change over this past week for prices reported on shipments to Southeast Asia, and prices were unchanged for containers going to Shanghai.
The April edition of the Grain Crushing and Coproducts report from USDA’s National Agricultural Statistics Service (NASS) indicates that U.S. production of DDGS in February was 1.8 million tons, down from January but up by 11 percent from February of 2015. U.S. exports of DDGS in February were down at 785,383 MT, with China remaining the top market and taking over a quarter of all sales.
Separately, February production of both corn gluten feed (312,012 tons) and corn gluten meal (83,643 tons) were down from January levels but up from February of a year ago.
Ethanol Comments: The April edition of the Grain Crushing and Coproducts report from USDA’s National Agricultural Statistics Service (NASS) indicates that corn use in February for alcohol was 470.2 million bushels, up 7 percent from a year ago, and corn used for fuel alcohol was at 420.8 million bushels. Exports of U.S. ethanol in February were 67 million gallons, down 23 percent from January. Year to date, U.S. ethanol exports are up a smidgen from a year ago to 154.1 million gallons. Alcohol is competitive with gasoline in Brazil and that nation increased its imports in February of U.S. alcohol with 9.5 million gallons of denatured and 12.5 million gallons of un-denatured.
U.S. ethanol production this past week was 976,000 barrels per day, down 16,000 barrels per day from a week ago. Stocks as of April 1 were at 22.2 million barrels, down 800,000 from a week earlier.
The margin between the corn price and the value of ethanol and coproducts was up this past week in three out of four market basket states. (See below.)
- Illinois differential is $1.34 per bushel, in comparison to $1.17 the prior week and $2.20 a year ago.
- Iowa differential is $1.30 per bushel, in comparison to $1.17 the prior week and $1.88 a year ago.
- Nebraska differential is $1.50 per bushel, in comparison to $1.59 the prior week and $1.68 a year ago.
- South Dakota differential is $1.53 per bushel, in comparison to $1.40 the prior week and $1.98 a year ago.
7. Country News
Argentina: The April estimate for the 2015/16 corn crop is 27.5 MMT, up 500,000 MT from the March estimate. (Informa)
Brazil: The government forecasted the corn crop at 84.66 MMT versus a March estimate of 83.52 MMT. Yield is marked at 5.47 tons per hectare, versus 5.4 tons per hectare last year. (Thompson Reuters)
China: It is speculated that China’s new corn policy will prompt farmers to instead grow more soybeans, though the extent of this substitution is unclear. (Various)
Japan: Japan bought 145,544 tons of old crop corn, providing a boost to the U.S. market. (Thomson Reuters)
9. Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: As you can see in the chart below, the Baltic freight indices put forth a pretty good rally this week. The Panamax index rose 24 percent in the Atlantic; the Pacific was up 13 percent. All vessel sectors enjoyed improved daily hire rates for the week. I understand the need for a market bounce but frankly cannot understand the justification for such a big jump. Sellers have been able to push up the market for fixtures going forward for 6-9 months and this has provided for limited support for the spot and 30 markets. The daily hire rate for Panamax vessels has climbed from under $3,000 per day up to about $5,000 per day in the current market.
I think the market is looking at the volume of vessel sales and the consolidation taking place in the industry and believing that this can justify higher rates. For me this situation does not reduce the number of ships in the fleet and therefore the size of the surplus; it only means that vessels are changing hands. It is, however, true that new vessel construction has come to a virtual standstill and that vessel scrapping have been high. So maybe the shipping industry has finally learned its lesson and is beginning to turn the corner on things. But, it will surely be a long gradual turn and not a sharp turn around.
The charts below represent year-to-date 2016 versus January-December 2015 annual totals for container shipments to Indonesia.