1. Chicago Board of Trade Market News
Outlook: The case for bullishness remains but the more bearish perspective has returned more prominently. The harvest of Brazil’s safrinha corn crop is still two months away and may involve a larger planted area; the Argentine crop looks good and the U.S. crop is going into the ground quickly. A weaker dollar is helping U.S. corn exports and big money should see commodity prices at or near bottom, but it will take something new to actually pick them up off the bottom – be it adverse weather, a weakening dollar or speculative zeal.
There is still discussion about whether there was any spillover effect in Chicago from the $261 billion speculative trade one-day last week in China’s commodity futures markets. There is certainly coincidence.
Weekly U.S. corn export sales were below expectations and overall marketing year sales are down nearly 13 percent. The mood ahead of next week’s WASDE report may be profit taking.
3. U.S. Weather/Crop Progress
U.S. Drought Monitor Weather Forecast: Over the next 5-7 days, temperatures are expected to be above normal over the eastern half of the United States with departures of 6-9 degrees above normal over the Southeast. The Pacific Northwest and northern Rocky Mountains also should see above-normal temperatures with departures of up to 12 degrees above normal. Cooler than normal temperatures are projected over the central Rocky Mountains into the Southwest with departures of 3-6 degrees below normal. Another active week appears likely as several storm systems develop over the West and eject out onto the Plains and move into the Northeast. Precipitation amounts are forecast to be greatest over the northern Rocky Mountains with amounts up to 5 inches over Wyoming. On the Plains, up to 3 inches are projected in portions of Missouri and east Texas while amounts of over 3 inches are expected in portions of the Mid-Atlantic. Most of the Great Basin, New England, and the Florida peninsula are forecast to receive widespread precipitation as well.
The 6-10 day outlooks show that the chances for above-normal temperatures are greatest over the East Coast, West Coast and Great Basin, while the best chances for below-normal temperatures will be over the northern and southern Plains. Forecasts show that the best chances for above-normal precipitation will be from the central and southern Plains to the East Coast. Chances for below-normal precipitation are best over the upper Midwest and Pacific Northwest.
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 769,300 MT for 2015/2016 were down 64 percent from the previous week and 44 percent from the prior 4-week average. Increases were reported for Japan (458,600 MT, including 111,900 MT switched from unknown destinations and decreases of 25,300 MT), Mexico (113,900 MT, including 57,000 MT switched from unknown destinations and decreases of 18,100 MT), Taiwan (88,700 MT, including 65,000 MT switched from unknown destinations and decreases of 700 MT), Peru (67,100 MT, including 57,000 MT switched from unknown destinations and decreases of 2,100 MT), China (65,100 MT, including 60,000 MT switched from unknown destinations), and Venezuela (60,000 MT). Reductions were reported for unknown destinations (246,200 MT), Nicaragua (18,800 MT), the French West Indies (8,600 MT) and Guatemala (2,000 MT). For 2016/2017, net sales of 60,500 MT were reported for Mexico (30,000 MT), Nicaragua (17,500 MT), and Peru (13,000 MT). Exports of 1,226,000 MT were up 13 percent from the previous week and 9 percent from the prior 4-week average. The primary destinations were Mexico (373,700 MT), Colombia (257,500 MT), Peru (140,900 MT), Japan (111,900 MT), Taiwan (101,000 MT), China (65,100 MT), and Venezuela (60,000 MT).
Optional Origin Sales: For 2015/2016, new optional origin sales totaling 50,000 MT were reported for unknown destinations. The current outstanding balance totals 392,000 MT, all unknown destinations.
Export Adjustments: Accumulated exports to Honduras were adjusted down 701 MT for week ending April 21st. This is an adjustment in the shipment tonnage.
Barley: There were no sales reported for 2015/2016 during the week. For 2016/2017, net sales of 500 MT were reported for Japan. Exports of 100 MT were reported to South Korea.
Sorghum: Net sales of 180,100 MT for 2015/2016 were up noticeably from the previous week and from the prior 4-week average. Increases reported for China (222,700 MT, including 50,000 MT switched from unknown destinations) and Mexico (2,300 MT), were partially offset by reductions for unknown destinations (44,900 MT). Exports of 229,000 MT were up noticeably from the previous week and 62 percent from prior 4-week average. The destinations were China (227,700 MT) and Mexico (1,300 MT).
6. Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS exports have gone well thus far this year and exporters report that they are now raising prices to be closer in line with the value of corn. Indeed, reported export pricing for this past week was up to all locations, including a $20/container increase to Japan and double digit increases to Southeast Asian markets. U.S. Census Bureau export data for U.S. exports of DDGS show a decline in sales to China but sales to Mexico remain on pace with last year and exports to Vietnam, South Korea, Indonesia, Turkey as well as other select markets are all sharply higher this year (see table below). Despite the declining exports to China, U.S. total DDGS exports to the world in the first half of 2015/16 at 5,366,764 MT are 17.5 percent higher than 4,567,106 MT exported during the first half of 2014/15.
Ethanol Comments: U.S. exports of ethanol were up 14 percent from March of 2015 with China the leading destination, which fits the central government’s plan to reduce pollution. The U.S. achieved another high-water mark in ethanol exports to China in February with a total of 33.653 million liters (valued at $18.21 million) compared with just 10,770 liters for the same month a year ago. Although February’s numbers are only 30 percent of January’s total, the total for just those two months is more than half of the volume that the U.S. sent to China in all of 2015.
The Energy Information Administration (EIA) increased the estimated stocks of ethanol to 22.2 million barrels (+572,000) as production fell by 4,000 barrels per day to 923,000 barrels per day, likely due to routine plant maintenance.
The margins between the corn price and the value of ethanol and coproducts were up in three out of the four key markets from a week ago (see below).
- Illinois differential is $1.57 per bushel, in comparison to $1.55 the prior week and $2.52 a year ago.
- Iowa differential is $1.64 per bushel, in comparison to $1.58 the prior week and $2.23 a year ago.
- Nebraska differential is $1.76 per bushel, in comparison to $1.82 the prior week and $2.11 a year ago.
- South Dakota differential is $2.02 per bushel, in comparison to $1.74 the prior week and $2.45 a year ago.
7. Country News
Argentina: Farmers will start harvesting corn in a few weeks with exports expected to increase during the July/August period. Premiums may fall but farmer selling at this juncture is minimal and prices are going up. (WPI)
China: Beijing estimates a 3-million-hectare decline in corn planted area this year as a result of recent policy changes. Meanwhile, corn planting conditions may not be optimal in China after an April that threw very cold and wet (soil moisture at 40 percent) weather at the Northeast and put Shandong Province through a very hot and dry spell – all of which is typical for the tail end of an El Niño period. (Reuters; weathertrends360)
EU: The EU Commission estimates the 2016 corn harvest at 65.3 MMT, leading to sharply reduced imports and a 1 MMT increase in carryover stocks. This contrasts with last year when it was a leading importer of corn due to drought. (DG-Agri)
Kenya: Field trials for GM maize will be conducted over the next two years with commercialization expected in 2018. (Reuters)
9. Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: I do not see any big changes in Dry-Bulk freight rates this week. The Baltic indices are down a little and it does seem that the past rally is over and that things will now set back a bit. As mentioned previously, the overall market fundamentals are not much changed and it will certainly take time for the global economy to pick up enough steam to create the volume of additional demand necessary to return the market to a profitable stance.
So in the meantime the market will bounce around and wait for better times. The biggest danger remains that of additional bankruptcies in the shipping industry and the risk that your cargo is on one of those vessels. I have received confirmation that 3-4 Handymax cargoes of U.S. wheat (both HRW and some SRW) have been sold to Brazil at rates of close to $15.00/MT. The wheat is going into both northern and southern Brazilian ports.
The charts below represent year-to-date 2016 versus January-December 2015 annual totals for container shipments to the Philippines.