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WEEKLY COMMODITY REPORT: December 24th 2020.

12/24/2020
  • The financial and economic uncertainties of transition to a Biden-Harris Administration and the escalating COVID-19 pandemic continue. These factors appear to have had little influence on the commodity market this past week that was influenced by exports. The direction of agricultural and trade policy to be implemented in 2021 will emerge following the confirmation of Tom Vilsack as USDA Secretary, Michael Regan as the Administrator of the EPA together with other Cabinet appointments and their subordinates relevant to agriculture.

 

  • S producers are now receiving and conversely livestock producers are paying over $4.50 per bushel for corn and $12.50 per bushel for soybeans plus transport and basis.

 

  • Commodity prices this past week were approximately four percent more than the previous week representing the highest levels in three years. Factors influencing prices included export orders, projected ending stocks, and the December 10th WASDE Report. Corn gained 3.2 percent for the week with daily fluctuation on prospects of additional orders from China and substantial shipments to other nations. Soybeans were up 5.1 percent this week mainly due to orders by China and other nations resulting in projected lower ending stocks. Soybean meal rose by 4.5 percent, reflecting the rise in the price of soybeans.

 

  • According to the USDA FAS Export Report for December 23rd during the past week export orders for corn amounted to 651,100 metric tons (25.7 million bushels) with 835,700 metric tons (32.9 million bushels) actually shipped. For the past week export orders for soybeans moderated to 352,800 metric tons (12.9 million bushels) with 2,518,400 metric tons (92.4 million bushels) actually shipped.

 

 

  • Prospects for commodity exports to China during the 2020/2021 market years that began on September 1st for corn and soybeans improved in December. China adjusted their domestic short-term demand for soybeans as a result of an apparent increase in the hog population after severe losses in 2019 and early 2020 due to African swine fever. White-feathered chicken production has now recovered after COVID disruptions and on increased QSR demand. China is also taking advantage of shipping rates that are fluctuating sharply in order to build inventory. The Baltic Dry Index tracking the three categories of vessels stood at 2,378 in mid-September 2019 but fell to 504 in late May 2020. The Index this past week stood at 1,211 having fallen 8.6 percent percent from last week, reversing the 9.4 percent rise for the previous week.

The following quotations for delivery in the months as indicated were posted by the CME at close of trading on December 24th compared with values posted at 13H30 on December 18th (in parentheses) reflecting specified months for delivery.

COMMODITY

 

Corn (cents per bushel)

 Dec. 451 (437)

March ‘21 450 (432)

Soybeans (cents per bushel)

 Jan. ’21 1,263 (1,202)

March ’21 1,265 (1,207)

Soybean meal ($ per ton)

 Jan. ‘21 416 (398 Dec.)

March ‘21 414 (397)

Changes in the price of corn, soybeans and soybean meal over four trading days this past week were:-

 

 

COMMODITY CHANGE FROM PAST WEEK

Corn: Dec. quotation up 14 cents per bushel (+3.2 percent)

 

Soybeans: Jan. quotation up 61 cents per bushel ( +5.1 percent )

 

Soybean Meal: Dec. quotation up $18 per ton (+4.5 percent)

 

  • For each 10 cent per bushel change in corn:-

The cost of egg production would change by 0.45 cent per dozen

The cost of broiler production would change by 0.25 cent per pound live weight

 

  • For each $10 per ton change in the price of soybean meal:-

The cost of egg production would change by 0.44 cent per dozen

The cost of broiler production would change by 0.25 cent per pound live weight

 

This week the changes in the prices of corn and soybean meal would raise nest-run production cost for eggs by 1.4 cents per dozen and 0.8 cents per live pound for broilers.

 

Uncertainties still include:-

  • There are questions as to whether China will satisfy quantitative obligations in terms of the Phase One Trade Agreement during calendar 2020. The Agreement signed in mid-January incorporated U.S. tariff rescissions, promised purchases of agricultural commodities (to attain $36.5 billion in 2020 and $43.5 billion in 2021), concessions on some structural issues by China and strengthened enforcement provisions. Renegotiation of the Phase-One Agreement by the incoming Administration is unlikely given the indication that current tariffs will be maintained.
  • Domestic U.S. soybean and soybean meal demand is now less constrained by COVID-induced cutbacks in the intensive livestock and poultry sectors.

 

According to the December 10th WASDE, corn to be harvested in calendar 2020 is expected to attain 14,507 million bushels with ending stocks projected at 1,702 million bushels. Final values will be modified by export volume and domestic use. Compared with December 4th, prior to close the CME quotation for corn on December 24th was up 14 cents per bushel for December delivery to 451 cents.

 

The social restrictions imposed in the U.S. as a result of COVID-19 will reduce ethanol demand by 1.5 billion gallons or 10 percent of projected 2020 requirement accepting a nominal ten percent addition to gasoline. A significant proportion of the U.S. ethanol fermentation capacity is off-line or operating at lower than capacity at present and the outlook for increased demand is questionable. According to the U.S. Energy Information Agency the industry produced on average 976,000 barrels per day for the week ending December 18th. This was the highest since the advent of COVID during the first quarter of the year. Ethanol stocks stood at 23.2 million barrels on December 18th. Ethanol was priced at $1.37 per gallon on December 24th unchanged from December 4th and compared with a five-year low of $0.92 per gallon on March 26th. Concurrently gasoline at $1.37 per gallon (quoted, New York Harbor) is at parity with ethanol but has a 63 percent higher BTU rating.

 

With more plants producing ethanol in the 4th quarter, DDGS is now available but at a higher price than in the third quarter. Eastern Corn-belt product was priced at $208 per ton on December 15th, $7 higher than the previous week and $55 per ton more expensive than December 17th 2019.

 

 Soybeans were to be the beneficiary of the Phase-One agreement with China and reflecting sales, rose to 1,263 cents per bushel on December 24th for January 2021 delivery. The USDA documented a 2020 crop of 4,170 million bushels. Ending stocks according to the December 10th WASDE projection will attain 175 million bushels, down from the November projection of 190 million bushels.

 

On December 15th Meat and Bone meal quoted Central U.S. attained $340 per ton, up $160 per ton on December 17th 2019.

 

On December 24th the BRL exchange with the CNY was 0.78, (unchanged from the previous week). The conversion of the US$ to the CNY was set at 6.54 on December 24th, unchanged from the previous week.

 

For consecutive calendar years 2017 through 2019 the U.S. supplied 34.4 percent of soybean requirements for China amounting to 95.5 million metric tons. This was followed by a decline to 16.9 percent of 88.5 million metric tons in 2018 and 16.6 percent of 88.0 million metric tons in 2019. The USDA anticipates that soybean imports by China will amount to 95 million metric tons during the 2020-2021 market year.

 

For the 2019/2020 market year China imported 2.1 million metric tons of corn from the U.S., 4.8 percent of total exports of 43.3 million tons, but 12 percent less than in the 2018/2019 market year.

 

For the 2019/2020 market year China imported 16.3 million metric tons of soybeans from the U.S., 36.2 percent of total exports of 44.9 million metric tons, but 3.9 percent less than in the 2018/2019 market year.

 

COMMENTS

Subscribers are referred to the December 10th WASDE #607 under the STATISTICS TAB

 

Approximately $16 billion was disbursed under the Coronavirus Food Assistance Program (CFAP) in early 2020. An additional $14 Billion relief package was announced by the Administration on September 18th with most of the allotment having been distributed.