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COMMODITY REPORT

03/23/2023

Weekly Commodity and Energy Report: March 23rd 2023.

 

 OVERVIEW

At 13H00 on March 23rd CME corn was down 0.3 percent to 631 cents per bushel compared to the previous week. Corn price was influenced by lower ethanol production and a projected higher ending stock as projected in the March WASDE despite noteworthy export orders this past week. Soybeans were down 5.2 percent from last week to 1,421 cents per bushel for May delivery. Soybean meal was 6.6 percent lower to $442 per ton for May delivery. The market has now accepted projections of crop size and higher stocks as documented in the March 8th WASDE Report. Commodity exports that rose this past week were influenced by a moderate fall in the Dollar Index to 102.2.

WTI was 4.0 percent higher at $70.96 per barrel on March 23rd at close of trading due to recession-related World fall in demand.

 

Factors influencing commodity prices in either direction over the past four

 weeks included:-

 

  • A mild U.S. recession in 2023 appears more likely following turbulence in the bank sector in the U.S. and Europe. The Federal Reserve increased the benchmark interest rate by 25 basis points at the March 22nd FOMC Meeting tempered by data indicating a gradual decline in inflation. This action to combat inflation was taken despite evidence that progressively higher rates are  stressing banks with two failures last week, albeit in mismanaged institutions. The GDP for the fourth quarter of 2022 attained 2.9 percent. The February 2023 CPI (6.0 percent) and WPI (3.9 percent) were lower than forecast (Transitory downward pressure on markets)

 

  • It is evident that polarization in the closely divided houses of Congress will result in conflict over raising the debt ceiling and agricultural legislation including the 2023 Farm Bill that includes SNAP and other entitlements. (Ultimately, downward pressure).

 

  • Geopolitical tensions that impact wheat, corn, oilseeds and vegetable oil exports from Ukraine persist. Extension of the Black Sea Grain Initiative for an additional 60 days was accepted by the Russian Federation on March 18th against undisclosed concessions on sanctions. The invader has inflicted extensive and deliberate damage on the agricultural and energy infrastructure of Ukraine including elevators and crushing plants. (Upward pressure on corn and wheat and an indirect effect on soybeans if Black Sea shipping is interrupted.)

 

  • The March 8th WASDE documented lower soybean and grain production and reduced exports from Argentine due to drought. The U.S. will export less corn resulting in higher ending stocks. Soybean exports will be higher, reducing ending stocks with resulting changes in price. (Lower domestic prices)

 

  • There is an expectation that Brazil will attain a record soybean harvest of 153 million metric tons with export of 93 million metric tons. Corn harvests from Brazil for the 2022-2023 season will be higher than the previous season although recent dry weather will reduce yields. Corn exports will attain 50 million metric tons (Lower prices in the future subject to favorable reports on crop progress and actual harvests)

 

  • The Dollar Index (DXY) has ranged from 95 to 116 over 52 weeks but has recently shown less volatility. The DXY was 102.2 on March 23rd. The dollar index influences timing and volume of export orders. (Fluctuation in corn and soybean prices, high value depresses U.S. sales)

 

EXPORTS

The restored and functional ‘legacy’ FAS Export Report released on March 23rd for the week ending March 16th reflecting market year 2022-2023, confirmed that outstanding export orders for corn amounted to 16.35 million metric tons (643.7 million bushels) with 18.6 million metric tons (731.5 million bushels) actually shipped. Net orders for the past week covering the 2022-2023 market year attained a noteworthy 3.1 million metric tons (121.9 million bushels) with 1.4 million metric tons (54.4 million bushels) shipped over the past working week. For the current market year outstanding sales of corn to date are 38.7 percent lower than for the corresponding week a year ago. For market year 2023-2024 outstanding sales this week amounted to 1.95 million metric tons (76.8 million bushels), with 0.1 million metric tons (3.7 million bushels) ordered for the 2023-2024-market year.

(Conversion 39.36 bushels per metric ton)

 

The FAS Export Report for the week ending March 16th reflecting market year 2022-2023, recorded outstanding export orders for soybeans amounting to 5.9 million metric tons (218.2 million bushels) with 43.5 million metric tons (1,599 million bushels) actually shipped. Net weekly soybean orders attained 0.15 million metric tons (5.6 million bushels) with 0.7 million metric tons (25.9 million bushels) shipped for the past week. For the current market year to date outstanding sales of soybeans are 1.5 percent higher than for the corresponding week a year ago. Sales recorded for market year 2023-2024 amounted to 1.8 million metric tons (64.1 million bushels) with sales of 0.2 million metric tons (7.3 million bushels) this past week. 

(Conversion 36.74 bushels per metric ton)

For the week ending March 16th 2022 net orders of soybean meal and cake amounted to 121,100 metric tons for the market year 2022-2023. During the past week 269,300 metric tons of meal and cake combined was shipped, representing 4.7 percent of the total 5,720,500 metric tons shipped during the current marketing year. This quantity is 99.1 percent of the volume shipped through the corresponding weeks of the previous market year. For the next market year outstanding sales attained 264,000 million metric tons with no sales this past week.

 

The USDA Grains and Oilseeds Outlook released on February 23rd documented initial 2023 planting intentions, ending stocks and prices for the major agricultural commodities.

  • Corn will be harvested from 83.1 million acres with a projected yield of 181.5 bushels per acre. Ending stocks will be up 48.9 percent to 1,887 million bushels, depressing price from the previous season by 16.4 percent to $5.60 per bushel.
  • Soybeans will be harvested from 86.7 million acres with a projected yield of 52 bushels per acre. Ending stocks will be up 28.9 percent to 290 million bushels tons, depressing price from the previous season by 9.8 percent to $12.90 per bushel.
  • Crushers will produce 54,475 million tons of soybean meal. Ending stocks will be up 35.0 percent to 450,000 tons depressing price from the previous season by 8.8 percent to $410 per ton.

 

Actual 2022 corn and soybean harvests and projected ending stocks were documented in the March 8th WASDE #634, posted under the STATISTICS Tab.  Corn yield attained 173.3 bushels per acre with a crop of 13,730 million bushels. Ending stock will increase by 5.9 percent to 1,342 million bushels. Soybean yield was 49.5 bushels per acre with a crop of 4,276 million bushels. Ending stocks were projected down by 6.7 percent to 210 million bushels. The March WASDE report was based on actual harvest data and incorporated amended domestic use and export categories. The WASDE presumably considered the predicted impact on world prices following disruption of the 2022 Ukraine crop by the invasion from the Russian Federation.  Values will be updated when WASDE #635 is released incorporating planting intentions, harvests in South America and trade.

 

COMMODITY PRICES

The following quotations for the months of delivery as indicated were posted by the CME at 13H00 on March 23rd 2023, compared with values at 14H00 on March 16th 2023  (in parentheses): -

 

COMMODITY

 

Corn (cents per bushel)

May    631   (633).

July     611   (616)

Soybeans (cents per bushel)

May 1,421   (1,489).

July  1,411   (1,473)     

Soybean meal ($ per ton)

May    442   (473).

July     438    (466) 

 

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

 

Corn:                  May quotation down 2 cents per bushel.          (-0.3 percent)

Soybeans:         May quotation down 77 cents per bushel         (-5.2 percent )

Soybean Meal: March quotation down $31 per ton                    (-6.6 percent)

 

The NASDAQ spot prices for feedstuffs per short ton at close of trading on March 22nd 2023 with prices for the previous week were:-

 

  • Corn (ZC): $226 was $224, up 0.9 percent).  52-week range $177 to $289
  • Soybean Meal (ZM): $452 was $481, down 6.0 percent. 52-week range $403 to $484

Values for other common ingredients per short ton:-

  • Meat and Bone Meal, (According to the USDA National Animal By-product Feedstuffs Report on March 17th): $350 to $425 for porcine (ex MN);  $415 to $480 for ruminant (ex Central states). Price varies according to plant and location  
  • DDGS, (IA. and other states) according to the University of Missouri Extension Service By-Product Feed Price Listing) $275 to $320 per ton. Price varies according to plant and location and is expected to fluctuate with the price of corn
  • Wheat Middlings: According to the USDA National Mill-Feeds and Miscellaneous Feedstuffs Report on March 17th for MO. and other states: $150 to $180 per ton (Current value reflects wheat price following the invasion of Ukraine and from U.S. drought)
  • Bakery Meal, (MO & TX): $225 to $240 per ton  (unchanged)
  • Rice Bran, (AR & TX): $185 to $260 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 spot prices of corn and soybean meal on March 23rd  compared with March 16th would have decreased nest-run production cost for eggs by 0.8 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, now eased, were projected to reduce ethanol demand in 2022-2023 by 1.5 billion gallons or 10 percent of projected 2021-2022 requirement, accepting a nominal ten percent addition (E-10) to gasoline. The latest U.S. Energy Information Administration (U.S. EIA) estimated that fuel ethanol blending would average 990,000 barrels per day in 2023, up 1.2 percent from 2022. This past week 87.8 percent (was 89.3 percent last week) of the U.S. ethanol fermentation volume was operational, based on the January 2022 U.S. EIA capacity data. The outlook for increased production will depend on higher domestic demand in addition to increasing the quantity that is exported. During December 2022 ethanol exports attained 72 million gallons (1.71 million barrels), down 29.0 percent from November with 65 percent to Canada; 12.3 percent to Philippines; Caribbean, 5.7; South Korea, 5.4; Mexico, 5.4; South and Central America, 1.6; Neither Brazil nor China imported ethanol from the U.S in November or December. U.S. imports in 2021, all from Brazil in November 2022 attained 21 million gallons (0.5 million barrels).

 

According to the U.S. EIA, for the week ending March 17th 2022 the industry produced on average 997,000 barrels of ethanol per day. This was down 1.7 percent from the week ending March 10th 2023 and below the one million gallon per day benchmark after nine consecutive weeks above this level. On March 17th ethanol stock was down 0.8 percent from the previous week off a record high to 26.2 million barrels, representing an approximately 22-day reserve and confirming lower demand, given relative changes in production level and stock. The U.S. Energy Information Administration forecast ethanol production at 970,000 barrels per day during the first quarter of 2023. The short-term prospects for increased domestic consumption are unfavorable despite bipartisan bills in Congress to permit year-round E-15 blend. Many older vehicles cannot use higher than an E-10 blend and there are obvious restraints on fuel stations to store and dispense high-ethanol blends without extensive capital investment in tanks and multi-blend pumps,

 

Current Energy Prices:-

  • Ethanol quoted on the CBOT (EH) on March 23rd was priced at $2.16 per gallon unchanged over previous months due to lack of trading and compared to a 52-week range of $2.16 to $2.19 per gallon.
  • On March 23rd RBOB gasoline traded on NASDAQ (RB) at $2.56 per gallon, up 14 cents (5.8 percent) from the previous week. The 52-week range for RBOB gasoline is $2.08 to $4.28.
  • The CME WTI crude price is responding to increased concern over demand caused by forecasts of World recession, but fluctuated up $2.76 (4.0 percent) over the past two days to  $70.96 per barrel on March 23rd compared to the previous week. Hydrocarbon sources of energy are now contributing less to inflation.
  • The AAA national average gasoline price declined progressively over successive weeks in late 2022. Recently gasoline has trended higher but on March 23rd was 3 cents (0.9 percent) lower than last week at $3.44 per gallon for unleaded regular grade. Gasoline is now $1.28 per gallon more expensive than ethanol but with a 63 percent higher BTU rating.
  • The AAA national average diesel price was $4.27 per gallon on March 23rd seven cents (1.6 percent) lower from the previous week but with prospects of a future rise in price due to a low national stock, despite a lower WTI price.
  • CME Henry Hub natural gas was priced at $1.93 per MM BTU on March 23rd down 49 cents (20.2 percent) from the previous week at a market bottom.

 

INGREDIENTS

 

DDGS is freely available with most plants among the 198 operational on January 8th 2022 with a combined capacity of 1,134 million barrels per day functioning at 87.8 percent. The University of Missouri Extension Service By-Product Feed Price Listing priced DDGS at $275 to $320 per ton on March 23rd. 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 with an appropriate lag period. 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 fluctuates in price

 

The CME soybean price for May 2023 delivery at 13H00 on March 23rd was 1,421 cents per bushel compared to the previous week at 1,589 cents per bushel for May delivery. The current price of soybeans is a reflection of availability for domestic crushing, consumption and export orders. Soybean meal was down 6.6 percent to $442 per ton for May 2023 delivery. Prices are obviously influenced by projections of harvest in the three major producing nations in South America terminals. Sharply lower barge rates on the Mississippi waterway system have made U.S. corn and soybeans more competitive relative to Brazil and Argentine.

 

According to a release on March 15th by the National Oilseed Processors Association, whose members process 95 percent of the U.S. crop, 165.4 million bushels of soybeans were crushed in February 2023, lower than estimates averaging 166.1 million bushels. Crush volume was down 7.6 percent from the previous month of January 2023, at 179.0 million bushels. The February 2023 crush was 0.2 percent higher than the February 2022 value of 165.7 million bushels.

 

On March 23rd the CME spot price for soybean oil was down 8.0 percent from the previous week at $51.85 cents per lb. Prices for vegetable oils have fluctuated over past weeks but with supplies in excess of demand. Nevertheless there is a growing market acceptance that total oilseed supply will eventually be limited by a sharply diminished supply 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. It is anticipated that 41 percent of U.S. soy oil was diverted from fuel to biodiesel during 2022.

 

On March 23rd, the soybean meal spot price quoted on NASDAQ was $452 per ton, $29 per ton lower than the spot price last week and compared to a 52-week range of $403 to $484 per ton.

 

On March 23rd Meat and Bone meal was priced over a range of $350 to $480 per ton according to the USDA National Animal By-product Feedstuffs Report, Prices quoted were for central U.S. plants but with a wide range based on composition, source and location. Price fluctuation reflects changes in soybean meal and other oilseed meals.

 

On March 23rd the conversion of the CNY to the BRL was BRL 0.78 down CNY 0.02 from last week. The conversion of the CNY to the US$ was CNY 6.61, up CNY 0.30 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 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 March 8th 2022 WASDE #634, the USDA quarterly Grain Stocks Report and the USDA Grains and Oilseeds Outlook posted under the STATISTICS Tab.

 

There is currently restricted operation of the Black Sea Grain Initiative (BSGI) allowing Ukraine to ship commodities from functioning ports. Export of grain by Ukraine declined in December 2022 to 4 million tons from 7 million tons in October. The three major grains (corn, wheat and barley) harvested during the 2022/2023 season will amount to 49.0 million metric tons, 42 percent lower than for 2021/2022. Exports were projected to attain 38.1 million metric tons, 26.5 percent lower than the previous market year. Since inception of the agreement 24 million tons of grains have been exported through the Black Sea Corridor. The BSGI has been extended beyond the March 18th termination date but only for 60 days. It is unknown whether the United Nations negotiators relaxed sanctions on exports of Russian agricultural commodities including fertilizer to achieve a settlement.