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COMMODITY REPORT

11/10/2022

WEEKLY COMMODITY REPORT: November 10th 2022.

 

OVERVIEW

Over the past five trading days December corn was down 4.1 percent in price to 653 cents per bushel. In contrast soybeans were almost unchanged compared to the previous week at 1,430 cents per bushel. The market is reviewing the projections of crop size and ending stocks in the November 9th WASDE #630. Despite fluctuating economic sentiment, restoration of shipping from Black Sea ports has reduced price pressure on wheat and other grains although revocation by Russia or some marine incident is always possible. Commodity prices in the U.S. were also impacted by a high Dollar Index and lower orders placed by China.

 

Factors influencing commodity prices in either direction over the past three weeks included:-

  • Renewed fears of a U.S. recession due to an aggressive Federal Reserve followed the September 13th CPI release and the fourth successive monthly 0.75 percent upward rate adjustment on November 2nd. A rebound in equity markets was evident during the past two weeks albeit with inter-day fluctuations. (Transitory upward pressure on markets)
  • A reduction in the October CPI to 0.4% compared to 0.8 percent for September suggests that inflation may have plateaued. (Downward pressure)
  • Low water levels on the Mississippi River and tributaries due to drought is impeding barge traffic (Downward pressure and lower cash prices paid to farmers)
  • Hot and dry conditions in extensive areas of the Corn Belt reduced the yield and quality of the late-planted 2022 corn crop. The yields for the corn and soybean harvests were updated in the November WASDE. (Downward pressure with higher ending stocks for corn and soybeans)
  • Geopolitical tensions that impacted wheat, corn, oilseeds and vegetable oil exports from Ukraine persist. Restoration of Black Sea shipping was accomplished following security guarantees by Ukraine to the Russian Federation. Russia has inflicted extensive and deliberate damage on the agricultural and energy infrastructure of Ukraine including elevators and crushing plants and has placed landmines in fields. (Upward pressure on corn and wheat and an indirect effect on soybeans if Black Sea shipping is interrupted.)
  • Expectation of high soybean and corn crops from Brazil for the 2022-2023 season. (Lower prices in the future subject to favorable reports on planting and crop progress)
  • Volatility of the Dollar Index (DXY) that declined from 105 on May 12th to 101 on June 2nd but rising again to 110 on November 9th influences timing and volume of export orders (contributes to fluctuation in corn and soybean prices, depresses U.S. sales)
  • Speculation in commodities by hedge funds declined consistent with falling equity prices in September with restoration in October but with a steady decline in the value of crypto currency. Concerns over a U.S. recession, reemerged in early October, as the Federal Reserve is intent on raising benchmark funds rates to suppress inflation. (Downward pressure)

 

Based on CME quotations on November 10th U.S. farmers are now receiving and conversely livestock producers and ethanol refiners in the Midwest will pay above $6.53 per bushel for corn delivered in December, down 4.1 percent from the quotation last week. Crushers will pay $14.30 per bushel for soybeans plus transport and basis for November delivery, almost unchanged from the previous week. December soybean meal was 2.7 percent lower compared to the quotation last week. Prices continued their moderate inter-day fluctuation and corn reversed the upward trend from the previous week with soybeans higher reflecting both domestic and export demand, projected new-crop harvest and ending stocks.

 

EXPORTS

The restored ‘legacy’ FAS Export Report released on November 10th for the week ending November 3rd reflecting market year 2022-2023, confirmed that outstanding export orders for corn amounted to 10.33 million metric tons (406.3 million bushels) with 4.40 million metric tons (173.3 million bushels) actually shipped. During the past week net orders for the 2022-2023 market year amounted to 0.27 million metric tons (10.4 million bushels) with 0.26 million metric tons (10.2 million bushels) shipped for the past week. For the current market year outstanding sales of corn to date are 59.4 percent lower than at the corresponding week a year ago. For market year 2023-2024 outstanding sales this week amounted to 0.31 million metric tons (12.2 million bushels), with no orders for the 2023-2024-market year.

(Conversion 39.36 bushels per metric ton)

 

The FAS Export Report for the week ending November 3rd reflecting market year 2022-2023, recorded outstanding export orders for soybeans amounting to 20.45 million metric tons (464.5 million bushels) with 12.64 million metric tons (363.4 million bushels) actually shipped. Net weekly soybean orders were 0.79 million metric tons (29.2 million bushels) with 2.75 million metric tons (101.1 million bushels) shipped for the past week. For the current market year to date outstanding sales of soybeans are 11.0 percent lower than for the corresponding week a year ago. Sales recorded for market year 2023-2024 are negligible (Conversion 36.74 bushels per metric ton)

 

For the week ending November 3rd 2022 net orders of soybean meal and cake amounted to 170,200 metric tons for the market year 2022-2023. During the past week 165,900 metric tons of meal and cake combined was shipped, representing 20.2 percent of the total 819,300 metric tons shipped during the current marketing year. This quantity is 75.9 percent of the volume shipped during the corresponding weeks of the previous market year. For the next market year outstanding sales attained 2.0 million metric tons with cancellations of 200,00 metric tons this past week.

 

Projected harvests and ending stocks were documented in the November WASDE #630,posted in this edition. Corn yield was projected at 172.3 bushels per acre with a crop of 13,930 million bushels. Soybean yield was projected at 50.2 bushels per acre with a crop of 4,346 million bushels This report took into account the late planting of corn in the U.S. and regional drought together with the predicted impact on world prices following invasion of Ukraine by Russia.

 

COMMODITY PRICES

The following quotations for the months of delivery as indicated were posted by the CME at 14H00 on November 10th 2022, compared with values at 14H00 on November 3rd 2022 (in parentheses): -

 

COMMODITY

Corn (cents per bushel)

Dec. 653 (681).

March ‘23 659 (686)

Soybeans (cents per bushel)

Nov. 1,430 (1,329).

Jan. ’23 1,422 (1439)

Soybean meal ($ per ton)

Dec. 404 (415). 

Jan. ‘23 404 (408)

 

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

Corn: Dec. quotation down 28 cents per bushel. (-4.1 percent)

Soybeans: Nov. quotation up 1 cent per bushel (+<0.1 percent)

Soybean Meal: Dec. quotation down $11 per ton ( -2.7 percent)

 

The NASDAQ spot prices for feedstuffs per short ton at close of trading on November 9th 2022 with prices for the previous week were:-

  • Corn (ZC): $238 was $249. 52-week range $177 to $292
  • Soybean Meal (ZM): $418 was $425. 52-week range $311 to $488

 

Values for other common ingredients per short ton:-

  • Meat and Bone Meal, (According to the USDA National Animal By-product Feedstuffs Report on November 4th): $350-$425 porcine $350 to $470 ruminant. Price varies according to plant and location
  • DDGS, (IA. and other states according to the USDA National Mill feeds and Miscellaneous Feedstuffs Report on November 4th.): $230 to $295 per ton. Price varies according to plant and location and is expected to fluctuate with the price of corn
  • Wheat Middlings, (MO. and other states): $225 to $250 per ton ($235 per ton in early June, with current price reflecting surge and subsequent fluctuation in wheat price following the invasion of Ukraine and from U.S. drought)
  • Bakery Meal, (MO & TX): $225 per ton (unchanged)
  • Rice Bran, (AR & TX): $180 to $220 per ton.

 

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 November 9th spot prices compared with November 3rd would decrease nest-run production cost for eggs by 1.6 cents per dozen.

*(Rounded to 0.1cent)

 

COMMENTARY ON AVAILABILITY AND PRICES OF FEED COMMODITIES

 

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 92.6 percent of the U.S. ethanol fermentation volume was operational, based on the January 2022 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 quantity that is exported. During August, net exports attained 74 million gallons.

 

According to the U.S. EIA, for the week ending November 4th 2022 the industry produced on average 1,051,000 barrels of ethanol per day. This was up 1.1 percent from the week ending October 28th 2022, and above the one million gallon per day benchmark for the fourth week after ten consecutive weeks below the one- million level. On November 4th ethanol stock was unchanged from the previous week at 22.2 million barrels, representing an approximately 20-day reserve and confirming lower demand given relative changes in production and stock. The White House has allowed all-year round 15 percent addition to gasoline. Given that many older vehicles cannot use higher than an E-10 blend and drivers are curtailing mileage due to high fuel costs and the reality of restraints imposed on fuel station storage and dispensing high blends, the short-term prospects for increased domestic consumption are unfavorable. 

 

Energy Prices

  • Ethanol quoted on the CBOT (EH) on November 9th was priced at $2.16 per gallon unchanged over previous months and compared to a 52-week range of $2.13 to $2.48 per gallon.
  • Concurrently RBOB gasoline traded on NASDAQ (RB) at $2.48 per gallon, down 12 cents per gallon (4.6 percent) from the previous week. The 52-week range for RBOB gasoline is $1.90 to $4.04.
  • The CME WTI crude price of $92.19 per barrel on November 9th was 3.3 percent higher than the previous week but with intra-week fluctuation in the energy market and hydrocarbon sources still contributing to inflation.
  • The AAA national gasoline price declined progressively over thirteen weeks before rising for four weeks and on November 9th was up 4 cents (1.1 percent) to $3.81 per gallon for unleaded grade. Gasoline is now $1.65 per gallon more expensive than ethanol with a 63 percent higher BTU rating.
  • Diesel was $5.36 per gallon, up 5 cents per gallon (0.9 percent) from the previous week but with prospects of a rise in price due to 6-decade low stock level.
  • CME Henry Hub natural gas was priced at $5.94 per MM BTU on November 9th, down 27 cents (4.3 percent) from the previous week.

 

With most plants among the 198 that were operational on January 1st 2022 with a combined capacity of 1,134 million barrels per day functioning at 91.6 percent, DDGS is freely available but commands a price reflecting corn. The USDA National Mill feeds and Miscellaneous Feedstuffs Report priced DDGS at $230 to $295 per ton on November 9th now lower after five previous weeks of price stability. Wide price variation exists depending on supplier, quantity 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 will change as corn and hence DDGS increases in price

 

The CME soybean price for November delivery at 14H00 on November 10th was almost unchanged at 1,430 cents per bushel compared to the previous week at 1,429 for November delivery. The stable price of soybeans is attributed to export orders and the reality that the 2022 crop was spared the impact of the July and August heat and drought. World availability of oilseeds was reduced following the late February 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 October 17th by the National Oilseed Processors Association, whose members process 95 percent of the U.S. crop, 158.1 million bushels of soybeans were crushed in September 2022, a one-year monthly low. This value was down 4.5 percent from August 2022 with 165.5 million bushels. During September 2022 the monthly crush was 2.8 percent higher than in September 2021 attaining 153.8 million bushels.

 

On November 9th the spot price for soybean oil was down 0.1 percent from previous week to 75.46 cents per lb. Higher prices for vegetable oils were posted over past weeks reflecting a growing acceptance that total oilseed supply will eventually be limited by a sharply diminished crop of sunflower oil from Ukraine, the world’s largest exporter of this commodity. Ukraine is subject to restraints on cultivation and limits on crushing and exports due to hostilities following the invasion by Russia. During 2022, it is anticipated that 41 percent of U.S. soy oil will be diverted from fuel to biodiesel.

 

On November 9th 2022, the soybean meal spot price quoted on NASDAQ was $418 per ton, $7 per ton lower than the spot price last week and compared to a 52-week range of $312 to $500 per ton.

 

On November 9th 2022, Meat and Bone meal was priced over a range of $350 to $470 per ton according to the USDA National Animal By-product Feedstuffs Report, Prices were for central U.S. plants but with a wide range among prices based on composition, source and location. Price fluctuation reflects changes in soybean meal and other oilseed meals.

 

On November 9th the conversion of the CNY to the BRL was BRL 0.71, down BRL 0.01 from last week. The conversion of the CNY to the US$ was CNY 7.27, up CNY0.02 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 representing the 2020/2021market year amounting to 73 million metric tons (2,876 million bushels) with 93 percent shipped.

 

For the 2021-2022 market year net export sales of corn were down 0.13 million tons (5.1 million bushels) compared to the previous market year with cumulative exports of 59.764 million tons (2,352 million bushels) 

 

For the 2021-2022 market year net export sales of soybeans were down 0.11 million tons (4.2 million bushels) compared to the previous market year with cumulative exports of 57.118 million tons (2,099 million bushels) 

 

COMMENT

Subscribers are referred to the October12th 2022 WASDE # 629 and the USDA quarterly Grain Stocks Report available under the STATISTICS tab. Data will be revised when WASDE # 630 is released in mid-November with the harvest almost completed.

 

There is doubt as to the continuity of the free-passage agreement to allow Ukraine to ship commodities from Black Sea ports. President Putin agreed to an extension of the agreement at the end of October. Ukraine apparently cleared the 2021 crop in storage to make room for the anticipated 2022 harvest in progress that will be lower compared to 2021.