1. Chicago Board of Trade Market News
Outlook: USDA’s planted acres and June 1 stocks reports were bearish. Farmers saw the spring run up in prices and planted more corn, 94.148 million acres, about 1.4 percent more than the trade had expected and up 7 percent from last year’s seeded area. There also turned out to be about 4 percent more corn in inventory (4.722 billion bushels/120 MMT) than the trade had expected. Soybeans are bullish and the price ratio with corn is at an historic 3.1/1. This will get baked into the market and remain until and unless weather during the upcoming pollination period takes a turn for the worse.
3. U.S. Weather/Crop Progress
U.S. Drought Monitor Weather Forecast: High pressure will maintain sunny skies across most of the eastern and southern U.S. into the weekend, with cooler-than-normal weather from the Corn Belt into the Northeast contrasting with lingering warmth over the Gulf Coast States. Showers will persist, however, in the western Corn Belt and central Plains, where rain could be locally heavy. During the upcoming holiday weekend, an area of low pressure will develop over the central High Plains and track eastward, producing a swath of increasingly heavy rain from the central Plains to the southern Corn Belt, reaching the southern Mid-Atlantic Region by early next week. Five-day rainfall totals are expected to top 5 inches in parts of Kansas, northern Oklahoma, and western Missouri. Farther west, monsoon showers will continue over the Four Corners and Southwest, with lighter showers spreading as far north as the central and northern Rockies. Hot, seasonably dry weather is expected over the Pacific Coast States. The NWS 6- to 10-day outlook for July 5-9 calls for above-normal temperatures across most of the nation, except for cooler conditions in the Northwest, with the greatest likelihood of abnormal warmth extending from the Corn Belt to the Gulf Coast. Above-normal rainfall is expected from the Upper Midwest to the southern Mid-Atlantic Coast, while drier-than-normal conditions are anticipated in New England and from the Interior Northwest southeastward to the western and southern Gulf 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 468,500 MT for 2015/2016 were down 46 percent from the previous week and 59 percent from the prior 4-week average. Increases were reported for South Korea (259,800 MT, including 131,000 MT switched from unknown destinations and decreases of 6,000 MT), Japan (140,300 MT, including 156,800 MT switched from unknown destinations and decreases of 54,000 MT), Vietnam (112,000 MT, including 125,000 MT switched from unknown destinations), Taiwan (65,800 MT), Colombia (60,000 MT), Egypt (58,800 MT, including 65,000 MT switched from unknown destinations and decreases of 6,200 MT), and Portugal (54,000 MT, including 50,000 MT switched from unknown destinations). Reductions were reported for unknown destinations (461,800 MT), Algeria (3,700 MT), Guatemala (2,600 MT), and Nicaragua (2,500 MT). For 2016/2017, net sales of 536,100 MT were reported for South Korea (138,000 MT), Mexico (135,900 MT), Japan (120,000 MT), Costa Rica (84,200 MT), and unknown destinations (48,500 MT). Exports of 1,497,200 MT were up 24 percent from the previous week and 29 percent from the prior 4-week average. The primary destinations were Japan (370,200 MT), Mexico (283,600 MT), Vietnam (176,400 MT), South Korea (125,900 MT), Peru (99,000 MT), and Chile (77,800 MT).
Optional Origin Sales: For 2015/2016, the current optional origin outstanding sales balance is 394,800 MT, all unknown destinations.
Barley: Net sales of 1,000 MT for 2016/2017 were reported for Vietnam. Exports of 400 MT were reported to Taiwan.
Sorghum: Net sales of 84,600 MT for 2015/2016 were down 50 percent from the previous week and 38 percent from the prior 4-week average. Increases reported for China (112,600 MT, including 53,000 MT switched from unknown destinations and decreases of 1,400 MT) and Colombia (25,000 MT), were partially offset by reductions for unknown destinations (53,000 MT). Exports of 56,300 MT were up noticeably from the previous week, but down 33 percent from the prior 4-week average. The destinations were China (53,100 MT) and Mexico (3,200 MT).
6. Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: China’s DDGS purchases have heretofore been tempered but that may have to change. Reports indicate that corn being sold out of China’s reserves is disappointing quality-wise and that feed mills are boosting their purchases of sorghum and DDGS in response. Indeed, China reportedly imported 2.94 MMT of feedstuffs (one-third of which was corn, plus DDGS, cassava, etc.) in May. The value of quality corn is rising while the price of poorer quality corn coming out of stocks is being forced to fall in order to be competitive with the fully landed cost of corn imports. One report suggested that future Chinese corn plantings will decline in favor of growing vegetables due to their rising value. Meanwhile, Southeast Asia remains a booming market for DDGS, taking advantage of low-cost container shipping rates, but some buyers are hoping for lower prices ahead. Korea was reportedly in the market this past week.
DDGS prices for August delivery declined this past week by an average $14.00/container. They also declined for September shipment, but by a much smaller $0.75/container average. The bulk of the declines were in destination markets, with U.S. domestic transfer points reporting only small declines and even a $3/container increase for FOB Gulf. This indicates that any more near-term declines at destination markets may also be smaller. The fall back in price was obligated by falling corn futures prices and will enable DDGS to be more competitive on a delivered basis.
Ethanol Comments: Ethanol margins have been satisfactory, incenting aggressive run times and so daily U.S. ethanol production rebounded this past week by 40,000 barrels per day and pushed average production per day back up over one million barrels. Stocks levels squeaked slightly higher by 21.2 million barrels.
The margins between the corn price and the value of ethanol and coproducts bounced around this past week (see below), depending on the market, but remain above levels recorded this time a year ago.
- Illinois differential is $1.92 per bushel, in comparison to $1.93 the prior week and $1.80 a year ago.
- Iowa differential is $2.03 per bushel, in comparison to $1.92 the prior week and $1.70 a year ago.
- Nebraska differential is $1.67 per bushel, in comparison to $1.66 the prior week and $1.51 a year ago.
- South Dakota differential is $2.09 per bushel, in comparison to $2.13 the prior week and $1.84 a year ago.
7. Country News
China: Only part of the reserve corn offered for sale at auction actually sold, and it netted a lower price ($248.56/MT) than the imported corn ($256.09/MT) offered for sale. Shanghai JC Intelligence Co. says that the poorer quality domestic supply may boost imports, though the National Grain Trade Center indicates that the government thus far only sold 8.1 MMT of the 125 MMT of corn it has in reserves. (Bloomberg)
Nigeria: The National Biosafety Management Agency approved confined field trials of glyphosate resistant maize despite opposition from 100 NGOs. (The Africa Report)
India: PEC Limited only received one bid to supply 48,000 MT of non-GMO corn from Ukraine at $245-255/MT. It was rejected for being too high and unaffordable. Ukrainian corn prices are rising because of diminishing offers from farmers. (WPI)
Kenya: Cereal Millers Association Chairman Nick Hutchinson says that the domestically produced maize is of very poor quality. He says that the country should consider switching to GMO maize to address the situation. (Citizen Reporter)
9. Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: With support from improved Q3 time charter rates the Baltic Panamax and Handymax indices gathered enough momentum to generate a good rally this week. The Capesize market, however, did not move much from last week’s levels. Physical Dry-Bulk freight markets moved up a little but, as often happens, but the physical freight markets did not get as excited as the traders on the Baltic Exchange.
The new expanded Panama Canal locks officially opened last Sunday. The Canal states that they have more than 170 neo-Panamax ship transit reservations already booked for the new locks. Due to the weather effects from El Niño, the Canal is operating at less than the maximum draft capacities. Current vessel drafts at the new locks are set at 43 feet (13.10 meters) rather than the maximum 50 feet (15.24 meters). Every foot of draft lost equates to about 2,000 MT of cargo capacity.
The charts below represent year-to-date 2016 versus January-December 2015 annual totals for container shipments to South Korea.