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COMMODITY REPORT

07/28/2022

OVERVIEW

Over the past five trading days the price trends for corn and soybeans were sharply higher with pronounced inter-day fluctuation. Corn on the CME was up 7.1 percent for September delivery to $6.16 per bushel. Soybeans were up 11.7 percent to $15.87 per bushel for August delivery. The market is still dominated by concerns over drought in some Midwest states, the domestic economy and the consequences of the invasion of Ukraine. Uncertainty is reinforced by the ultimate impact on yields due to the La Nina- induced drought in Brazil and neighboring producer nations. Prices were also influenced by a high but stable Dollar index and only minimal new orders placed by China offset by increasing domestic U.S. demand for biofuels.

 

 

Factors influencing commodity prices in either direction included:-

 

  • Despite fears of a U.S. recession equity markets are higher with commodities up this past week, most evident on July 27th and 28th.
  • Geopolitical tensions threatening wheat, corn, oilseeds and oil exports from Ukraine following the invasion together with restriction on Black Sea shipping. Russia agreed in a deal brokered by Turkey and the U.N. to allow safe passage for grain exports from Ukraine if sanctions were lifted.  Russia then cynically bombarded the Port of Odessa. This belligerent appears to be selectively destroying agricultural infrastructure in Ukraine including elevators and crushing plants and placing landmines in fields with overtones of the Holomodor famine of 1932-1933. (upward pressure on corn and wheat and an indirect effect on soybeans if hostilities continue.)
  • Concerns are evident over hot and dry conditions affecting the yield and quality of the late-planted corn. There was more certainty on the size of the crop and ending stocks with the release of the July WASDE #626 but the August report will be more definitive. (moderate upward pressure on corn and soybeans)
  • Drought affecting Argentina, Paraguay and Brazil especially in that nation’s Southern states due to a prolonged La Nina event. (upward pressure of intermediate intensity).
  • Lackluster orders from a range of nations but mostly China for soybeans consistent with projections of reduced domestic demand due to COVID restrictions and economic slowdown. Orders from China approaching the end of the market year are based on lower prices and presumably their domestic stock levels and projections for the coming market year. (transitory downward pressure on soybeans)
  • Demand for soy oil to be diverted to biodiesel, exacerbated by concerns over shortages of sunflower oil from Ukraine. There was evident easing with lifting of all restrictions on export of palm oil by Indonesia (variable downward pressure on soybeans and meal)
  • Progress among the 2022 corn and soybean crops now conforms to 4-year average values. Delay in planting was due to inclement weather and non-availability of fertilizer in some regions. (decreasing effect on corn and neutral on soybeans).
  • Volatility of the Dollar Index (DXY) that declined from 105 on May 12th to 101 on June 2nd but has remained at 107 for the past two weeks. This has influenced timing and volume of export orders (fluctuation in corn and soybean prices)
  • Speculation in commodities by hedge funds is declining amid fluctuating equity prices and a sharp decline in cryptocurrency, concerns over a possible recession and a 0.75 percent rise in the Federal Reserve benchmark funds rate. (downward pressure)

 

Based on CME quotations on July 28th U.S. farmers are now receiving and conversely livestock producers and ethanol refiners in the Midwest will pay above $6.16 per bushel for corn delivered in September, up 7.1 percent from the July 20th quotation for September delivery. Crushers will pay $15.87 per bushel for soybeans plus transport and basis for August delivery, up 11.7 percent from the July 20th quotation for August delivery. Soybean meal increased by 12.0 percent or $52 per ton, for August delivery, reversing the trend from the previous week and responding to both domestic and export demand for soy oil.

EXPORTS

 

The FAS Export Report released on July 28th for the week ending July 21st reflecting market year 2021-2022, confirmed that outstanding export orders for corn for the current market year amounted to 5.21 million metric tons (205.0 million bushels) with 55.3 million metric tons (2,180 million bushels) actually shipped. During the past week net orders for the 2021-2022 market year amounted to 0.15 million metric tons (5.9 million bushels) with 0.9 million metric tons (34.1 million bushels) shipped. For the current market year shipments of corn to date are 10.8 percent lower than at the corresponding week a year ago. For market year 2022-2023 outstanding sales this week amounted to 7.60 million metric tons (299.14 million bushels), with 0.19 million metric tons (7.6 million bushels) ordered for the following market year.

 (Conversion 39.36 bushels per metric ton)

 

The FAS Export Report released on July 28th 2022 for the week ending July 21st reflecting market year 2021-2022, recorded outstanding export orders for soybeans amounting to 6.17 million metric tons (226.7 million bushels) with 53.6 million metric tons (1,971 million bushels) actually shipped. Net weekly soybean orders were -0.59 million tons million metric tons (21.5 million bushels) due to cancellations with 0.40 million metric tons (14.5 million bushels) shipped. For the current market year to date shipments of soybeans are 9.6 percent lower than for the corresponding week a year ago. For market year 2022-2023 outstanding sales amounted to 14.9 million metric tons (534.6 million bushels), with 0.75 million metric tons (27.5 million bushels) ordered this past week.

       (Conversion 36.74 bushels per metric ton)

 

For the week ending July 21st 2022 net orders of soybean meal and cake amounted to 28,000 metric tons of for the market year 2021-2022 down 74 percent compared to 109,300 tons from the previous week. During the past week 195,300 metric tons of meal and cake combined was shipped, up 30.5 percent from the previous week and representing 2.0 percent of the total 9,703,800 metric tons shipped during the current marketing year to date. This quantity is 0.6 percent lower than the previous market year.

 

 

Projected harvests and ending stocks were documented in the July 12th WASDE #626, under the STATS tab. The anticipated WASDE #627 will be reviewed in the mid-August edition of EGG-NEWS with projections of quantities harvested and the effects of weather, trade and domestic consumption on ending stocks of corn updated from the July report.  Data should take into account the late planting of corn in the U.S. and regional drought that may affect yield and the predicted consequences of the invasion of Ukraine by Russia. These events will affect world trade.

 

COMMODITY PRICES

 

The following quotations for the months of delivery as indicated were posted by the CME at 14H00 on July 28th 2022, compared with values posted at 15H00 on July 21st 2022  (in parentheses):-

 

COMMODITY

 

Corn (cents per bushel)

Sept.   616      (575).

Dec. 619  (573)   New crop

Soybeans (cents per bushel)

Aug. 1,587  (1,421).

Sept. 1,438 (1,313)

Soybean meal ($ per ton)

Aug.    487     (435 ). 

Sept.    442     (403)

 

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

 

Corn:                  Sept. quotation up 41 cents per bushel             (+7.1 percent)

Soybeans:         Aug. quotation up 166 cents per bushel           (+11.7 percent)

Soybean Meal: Aug. quotation up $52 per ton                             (+12.0 percent)

 

The NASDAQ spot prices for feedstuffs per short ton for July 27th 2022 with prices for the previous week were:-

 

  • Corn (ZC): $214 was $251.  52-week range $177 to $292
  • Soybean Meal (ZM): $426 was $3.91. 52-week range $311 to $488

 

Values for other common ingredients per short ton:-

  • Meat and Bone Meal (ruminant, Central U.S.): $500 to $550 (wide range for this ingredient according to source and location)
  • DDGS, (MO. and other states.): $220 to $250 per ton  (was $250-$300) Price varies according to plant and location and is expected to rise with corn
  • Wheat Middlings (MO. And other states): $250 to $300 per ton (unchanged) $235 per ton in early June, with current price reflecting surge in wheat price due to invasion of Ukraine and U.S. drought)
  • Bakery Meal (MO & TX): $225 per ton  ($225)

 

 

  • For each $1 per ton (2.8 cents/bushel) change in corn the cost of egg production would change by 0.11 cent per dozen

 

  • For each $10 per ton change in the price of soybean meal the cost of egg production would change by 0.35 cent per dozen

 

 

The respective changes in the prices of corn and soybean meal for July 27th spot prices compared with July 21st would decrease nest-run production cost for eggs by   2.8 cents per dozen.

*(rounded to 0.1cent)

 

COMMENTARY ON AVAILABILITY AND PRICES OF FEED COMMODITIES

According to the July 12th WASDE #626, corn harvested in calendar 2022 will attain 14,505 million bushels with ending stocks projected at 1,470 million bushels down 5.0 percent from the June 2022 WASDE Report. Total corn stocks on June 1st 2022 amounted to 4.35 billion bushels up 6 percent from June1st 2021”. Yield will be revised in the August WASDE to reflect the impact of the July heat and drought.

 

The social restrictions imposed in the U.S. as a result of COVID-19, that are now being eased, were projected to reduce ethanol demand by 1.5 billion gallons or 10 percent of projected 2020-2022 requirement, accepting a nominal ten percent addition (E-10) to gasoline. This past week 89.7 percent of the U.S. ethanol fermentation volume was operational, based on the September 2021 U.S. Energy Information Administration (U.S. EIA) capacity data. The outlook for increased production will depend on unlikely higher domestic demand in addition to increasing the proportion of production that is exported.

 

According to the U.S. EIA, for the week ending July 22nd 2022 the industry produced on average 1,021,000 barrels of ethanol per day. This was down 1.3 percent from the week ending July 15th 2022, but above the one-million gallon per day benchmark for the tenth consecutive week. On July 22nd ethanol stock was down 1.2 percent from the previous week to 23.3 million barrels, representing an approximately 20-day reserve and confirming almost static demand given similar relative changes in  production and stock. The White House has allowed all-year round 15 percent addition to gasoline. Given that many light vehicles cannot use more than E-10 blend and drivers are curtailing mileage due to high fuel costs and with restraints imposed on fuel station storage and dispensing, the short-term prospects for increased domestic consumption are unfavorable. 

 

Ethanol quoted on the CBOT (EH) on July 27th was priced at $2.16 per gallon unchanged from the previous week and compared to a 52-week range of $2.13 to $2.48 per gallon. Concurrently RBOB gasoline traded on NASDAQ (RB) at $3.16 per gallon on July 27th down 12 cents per gallon (3.6 percent) from the previous week. The 52-week range for RBOB gasoline is $1.90 to $4.04. The CME WTI crude price of $98.78 per barrel on July 27th was 3.1 percent lower than the previous week but with hydrocarbon energy still contributing to inflation. The AAA national gasoline price has declined progressively over five weeks and on July 27th was down 3.8 percent to $4.30 per gallon for unleaded grade. Diesel was $5.37 per gallon down 2.4 percent.  Gasoline is now $1.0 per gallon more expensive than ethanol but with a 63 percent higher BTU rating.

 

With most plants among the 197 that were operational on January 1st 2021 now functioning, DDGS is freely available but commands a price consistent with corn. A Missouri plant priced a branded DDGS at $250 per ton on July 27th unchanged from the previous week. Wide price variation exists with a modal range of $275 to $300 depending on supplier and location. It is axiomatic that the cost of DDGS will reflect changes in the price of corn. Generally DDGS is currently incorporated at moderate inclusion levels in egg-production formulas based on price relative to the nutrient contribution of corn and other ingredients. This may change as corn and hence DDGS fluctuates in price

 

 Soybeans continue to be the beneficiary of export demand by China although with a lower volume than the previous market year. Exports are maintained by supplying other nations in addition to domestic livestock production and demand for soy oil. The USDA projected a harvest of 4,505 million bushels in the July WASDE #626. Ending stocks were lowered 17.9 percent from 280 to 230 million bushels. Total soybean stock on June 1st 2021 amounted to 971 million bushels up 26 percent from June 1st 2021 indicating lower exports during the 2021-2022 market year.

 

The CME soybean price for August delivery at 14H00 on July 28th was higher by 166 cents per bushel from 1,421 cents per bushel for August delivery to 1,587 cents per bushel for August delivery. The increase in the price of soybeans denotes a reversal from the previous week and is attributed to concern over world availability of oilseeds following the invasion of Ukraine. Prices are obviously influenced by projections of yield in the three major producing nations in South America.

 

According to a release on July 15th by the National Oilseed Processors Association, with members processing 95 percent of the 164.7 million bushels of soybeans crushed in June 2022. This value was down 3.7 percent from May 2022 at 171.1 million bushels. In June 2021 the monthly crush was 7.5 percent lower than in 2022 attaining 152.4 million bushels.

 Soybean oil advanced by 5.2 percent to 60.5 cents per lb. on July 27th up from 57.5 cents per lb. last week. Relatively unchanged prices this past week were posted despite the reality that world oilseed supply will be limited by a sharply diminished crop and availability of sunflower from Ukraine, the world’s largest exporter with barriers to exports imposed by Russia. During calendar 2022, it is anticipated that 43 percent of U.S. soy oil will be diverted from fuel to biodiesel.

 

On July 27th 2022 soybean meal was quoted on NASDAQ at $426 per ton, $35 per ton higher than the spot price last week and compared to a 52-week range of $312 to $500 per ton.

 

On July 27th 2022 Ruminant Meat and Bone meal was priced over a range of $500 to $550 per ton quoted from Central U.S. plants but with a wide range of prices based on composition, source and location. Price fluctuation reflects changes in soybean meal and other oilseed meals.

 

On July 27th the conversion of the CNY to the BRL was down BRL3 from the previous week. The conversion of the US$ to the CNY was CNY 6.76, 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 anticipated that soybean imports by China would attain 95.0 million metric tons during the 2020-2021 market year but in reality only 60.3 million tons was shipped through August 2021.

 

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. The USDA-FAS documented sales of U.S. corn to China through late August 2021 comprising the 2020/2021market year amounting to 73 million metric tons (2,876 million bushels) with 93 percent shipped.

 

For 2021 the U.S. exported corn to the value of $17,473 million, 112 percent more than in 2020 and comprising 10 percent of the value of all U.S. agricultural exports.

 

For 2021 the U.S. exported soybeans to the value of $26,476 million 48 percent more than in 2020 and 15 percent of the value all U.S. agricultural exports.

 

COMMENT

Subscribers are referred to the July 12th 2022 WASDE # 626 and the USDA quarterly Grain Stocks Report available under the STATISTICS tab. Data will be revised when WASDE # 627 is released in mid-August.