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COMMODITY REPORT

05/25/2023

Weekly Commodity and Energy Report: May 25th 2023.

 

OVERVIEW

 

At 15H00 on May 25th CME corn was up 7.5 percent compared to the previous week to 591 cents per bushel for July delivery. This increase was despite a large predicted crop and high ending stocks projected for the 2023 season as documented in the May WASDE and cancellation of orders by China. Price was also influenced to a minor degree by ethanol production and higher demand.

 

Soybeans were down 0.3 percent from last week to 1,326 cents per bushel for July delivery. Soybean meal was down 4.6 percent to $398 per ton for July delivery but price will fluctuate to reflect the price of soybeans and demand for soy oil. The market has now accepted projections of crop size and higher stocks from the old crop as documented in the April 11th WASDE Report and the projections included in the May WASDE report for the 2023 crop.

 

Commodity exports that fluctuated this past week were possibly influenced by a rise in the Dollar Index to 104.0.

 

WTI was 2.9 percent higher at $74.23 per barrel at close of trading on May 24th despite the April announcement of an intended production cut by OPEC.

 

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 both the U.S. and Europe. The Federal Reserve increased the benchmark interest rate at the 10th successive monthly FOMC meeting on May 3rd by 25 basis points despite data indicating a gradual decline in inflation. This action was taken against evidence that progressively higher rates are stressing banks, depressing the housing market and impacting retail sales. On March 30th the Bureau of Economic Analysis issued a revised Real GDP of 2.6 percent for the fourth quarter of 2022. This value is based on increased consumer spending offset by lower investment in housing and a 0.6 percent increase in personal income. The April 2023 CPI (up 4.9 percent) and the revised March WPI (down to 2.7 percent) were lower than forecast. On March 18th initial jobless claims were 242,000 due to layoffs with the number lower than expected. Non-farm payrolls increased to 253,000 during April as documented by the Bureau of Labor Statistics on May 5th with an unemployment rate of 3.4 percent. The April Producer Price Index was up 2.3 percent year-over-year and 0.2 percent down from March. These values were lower than expected suggesting a cooling in the U.S. economy. This is confirmed by the anemic first quarter GNP increase of 1.1 percent, lower than the 2.0 percent expected. (Transitory downward pressure on markets)

 

  • It is evident that polarization in the closely divided chambers of Congress will result in conflict over spending. Passage of agricultural legislation including the 2023 Farm Bill will be contentious as SNAP eligibility and other entitlements represent 75 percent of the total. An 11th-hour compromise is expected on raising the debt ceiling given White House negotiations with the Republican Party house leadership this past week ahead of a June 1st potential default. (Ultimately, downward pressure if debt ceiling is not resolved).

 

  • A cold snap in early May resulted in frost extending from the Northern Plains to the Texas Panhandle. Wheat and soybeans will be impacted but recently planted corn will be less affected. Rains have relieved drought on the southern plains. Wheat yield and acreage will be reduced in Kansas with an indirect effect on corn. (Variable pressure on prices with firmer indications in the June WASDE)

 

  • 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 reluctantly accepted by the Russian Federation on May 18th against undisclosed concessions on sanctions. Implementation is intermittently obstructed by actions of the Russian Federation with threats of non-extension, roiling markets. (Upward pressure on corn and wheat and an indirect effect on soybeans if Black Sea shipping is interrupted)

 

  • The May 12th WASDE documented near record soybean and grain production for the 2023 season with increased world availability despite drought in the Argentine. The U.S. will export 12 percent of old crop corn resulting in a stable ending stock. Soybean exports will comprise 44 percent of the old crop with no change in ending stock.  (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 including the safrinha crop although recent dry weather reduced 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 99 to 116 over 52 weeks but has recently shown an upward trend. The DXY was 104.0 on May 24th a five-week high. The dollar index influences timing and volume of export orders. (Fluctuation in corn and soybean prices, high value depresses U.S. sales)

 

 

EXPORTS

The FAS Export Report released on May25th for the week ending May 17th reflecting market year 2022-2023, confirmed that outstanding export orders for corn amounted to 9.87 million metric tons (349.2 million bushels) with 29.1 million metric tons (1,146 million bushels) actually shipped. Net orders for the past week covering the 2022-2023 market year amounted to a negative 75,000 metric tons      (-29.5 million bushels) due to cancellations by China. Shipment of 1.5 million metric tons (59.2 million bushels) was recorded during the past working week. For the current market year outstanding sales of corn to date are 34.9 percent lower than for the corresponding week a year ago. For market year 2023-2024 outstanding sales this week amounted to 2.8 million metric tons (108.3 million bushels), with orders this week for the 2023-2024-market year amounting to 52,000 metric tons (2.1 million bushels).  (Conversion 39.36 bushels per metric ton. Quantities in metric tons rounded to 0.1 million )

 

The FAS Export Report for the week ending May 17th reflecting market year 2022-2023, recorded outstanding export orders for soybeans amounting to 2.9 million metric tons (108.1 million bushels) with 47.9 million metric tons (1,760 million bushels) actually shipped. Net weekly soybean orders attained 0.12 million metric tons (4.4 million bushels) with 0.3 million metric tons (10.6 million bushels) shipped for the past week. For the current market year to date outstanding sales of soybeans are 2.6 percent lower than for the corresponding week a year ago. Outstanding sales recorded for market year 2023-2024 amounted to 2.6 million metric tons (93.8 million bushels) with 1.1 million metric tons (40.4 million bushels) sold this past week.             (Conversion 36.74 bushels per metric ton)

 

For the week ending May 17th 2023 net orders of soybean meal and cake amounted to 341,300 metric tons for the market year 2022-2023. During the past week 226,000 metric tons of meal and cake combined was shipped, representing 2.8 percent of the total 7,951,300 metric tons exported during the current marketing year. This quantity to date is 1.4 percent higher than the volume for the corresponding period of the previous market year. For the next market year outstanding sales have attained 455,000 metric tons with 50,600 metric tons ordered this past week.

 

The annual 2023 USDA Prospective Plantings Report, and the May 12th 2023 WASDE confirmed:-

  • Corn area planted for all purposes in 2023 will attain 92.0 million acres, up 4 percent or 3.42 million acres from last year. Compared with last year, planted acreage is expected to be up or unchanged in 40 of the 48 estimating States. Yield was raised to 181.5 bushels per acre with a resulting 2,100 million bushel ending stock reducing USDA projective average season price to 480 cents per bushel.
  • Soybean area planted for 2023 is estimated at 87.5 million acres, up slightly from last year. Compared with last year, planted acreage is up or unchanged in 15 of the 29 estimating States. Yield was raised to 52.0 bushels per acre with a resulting 335 million bushel ending stock reducing the USDA projected average season price to 1,210 cents per bushel.
  • Crushers are expected to produce 54,475 million tons of soybean meal. Ending stocks will be up 35.0 percent to 400,000 tons depressing the USDA projected price from the previous season by 27 percent to $365 per ton.

 

The preference for corn is based on a favorable corn to soy benefit ratio.

 

 

Actual 2022 corn and soybean harvests and projected ending stocks were documented in the April 11th WASDE #635, posted under the STATISTICS Tab.  Corn yield attained 173.3 bushels per acre with a crop of 13,730 million bushels. Ending stock will attain 1,342 million bushels. Soybean yield was 49.5 bushels per acre with a crop of 4,276 million bushels. Ending stocks were projected to be 210 million bushels. The April WASDE report was based on actual harvest data and values incorporated amended domestic use and export categories. This WASDE report presumably considered the predicted impact on world prices following disruption of the 2022 Ukraine crop following the invasion of Ukraine by the Russian Federation.  Values will be updated when WASDE #637 is released in June incorporating crop progress, harvests in South America and world trade.

 

COMMODITY PRICES

The following quotations for the months of delivery as indicated were posted by the CME at 15H00 EDT on May 25th 2023, compared with values at 12H00 on May 18th 2023  (in parentheses): -

 

COMMODITY

 

Corn (cents per bushel)

July    591   (550).

Sept.     510   (489)

Soybeans (cents per bushel)

July 1,326   (1,330).

Sept.   1,186  (1,200)

Soybean meal ($ per ton)

July    398   (417).

Sept.      385   (399) 

 

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

Corn:                   July quotation up 41 cents per bushel.           (+7.5 percent)

Soybeans:          July quotation down 4 cents per bushel        (-0.3 percent)

Soybean Meal:  July quotation down $19 per ton                     (-4.6 percent)

 

The NASDAQ spot prices for feedstuffs per short ton at close of trading on May 24th 2023 with prices for the previous week were:-

 

  • Corn (ZC): $210 per ton was $208 (up 1.0 percent from the previous week).  52-week range $198 to $289
  • Soybean Meal (ZM): $402 per ton was $425 (down 5.4 percent from the previous week). 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 May 19th): $475 to $525 (Av.$495) per ton for porcine (ex MN);  $440 to $475 (Av. $460) per ton 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) $240 to $280 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 May 19th for MO. and other states: $130 to $170 (Av. $155) per ton (Current value reflect wheat price following the disruption of production and shipping from Ukraine and from U.S and world weather extremes)
  • Bakery Meal, (MO & TX): $215 to $240 per ton  (unchanged from last week)
  • Rice Bran, (AR & TX): $180 to $240 per ton. (unchanged from last week)

 

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 May 24th compared with May 17th would decrease nest-run production cost for eggs by 0.6 cent per dozen.

 

*(Rounded to 0.1cent)

COMMENTARY ON AVAILABILITY AND PRICES OF FEED COMMODITIES

The latest U.S. Energy Information Administration (U.S. EIA) report estimated that fuel ethanol blending would average 990,000 barrels per day in 2023, up 1.2 percent from 2022. This past week 86.9 percent (87.3 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, from summer driving in addition to increasing the quantity that is exported.

During February 2023  (the last month for which data is available) ethanol exports were down 11.9 percent from January to 104 million gallons (2.48 million barrels). Importers and their proportions of total volume for the month included:-  40.5 percent to Canada; 9.9 percent to South Korea; 9.3 percent to the U.K.; 6.2 percent to the Caribbean; 5.5 percent to the Philippines; 5.4 percent to Nigeria; 5.3 percent to Central and South America; 5.1 percent to Mexico; 4.8 percent to the UAE and 2.7 percent to E.U. nations. Brazil imported less than one percent in February and did not import ethanol from the U.S. since November 2022.

 

According to the U.S. EIA, for the week ending May 19th 2023 the industry produced on average 983,000 barrels of ethanol per day. This was 0.5 percent down from the week ending May 12th 2023 and continuing below the one million gallon per day benchmark. On May 19th ethanol stock was down 5.0 percent from the previous week to 22.0 million barrels, representing a 17-month low and an approximately 19-day reserve. This past week demonstrated higher demand for ethanol, given relative changes in the weekly 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 although this projected volume was exceeded. The short-term prospects for increased domestic consumption are unfavorable despite a 2023 summer waiver and 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 May 24th was priced at $2.14 per gallon, down 2 cents (0.9 percent) lower than last week and after an unchanged price over previous months due to lack of trading. The 52-week range is $2.14 to $2.19 per gallon.
  • On May 25th RBOB gasoline traded on NASDAQ (RB) at $2.62 per gallon, up 11 cents (4.3 percent) from the previous week. The 52-week range for RBOB gasoline is $2.08 to $4.28.
  • The CME WTI crude price is ignoring concern over possible lower supply due to announced OPEC production cuts and predictions for a World recession. Price was up $2.10 (2.9 percent) to $74.23 per barrel on May 24th compared to the previous week. Hydrocarbon sources of energy are now contributing less to inflation than during the first quarter of 2023.
  • The AAA national average regular grade gasoline price was $3.56 per gallon on May 24th up 3.0 cents (0.8 percent) higher than last week. Gasoline is now $1.42 per gallon more expensive than ethanol but with a 63 percent higher BTU rating.
  • The AAA national average diesel price was $3.99 per gallon on May 24th, down two cents per gallon (0.5 percent) from the previous week but with prospects of a future rise in price due to a low national stock, although modulated by the WTI price.
  • CME Henry Hub natural gas was priced at $2.58 per MM BTU on May 24th up 21 cents per MM BTU (8.9 percent) from the previous week

 

INGREDIENTS

 

DDGS is freely available with most plants among the 192 operational on January 1st 2022 (the last available estimate) with a combined capacity of 1,134 million barrels per day functioning at 86.9 percent. The University of Missouri Extension Service By-Product Feed Price Listing priced DDGS at $240 to $260 per ton on May 24th. Wide variation in price 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 fluctuate in price

 

The CME soybean price for July 2023 delivery at 15H00 on May 25th was down 0.3 percent to 1,326 cents per bushel compared to the previous week at 1,330 cents per bushel for July delivery. The current price of soybeans is a reflection of availability for domestic crushing, consumption and export orders. Soybean meal was down 4.6 percent to $398 per ton for July 2023 delivery. Prices are obviously influenced by projections of harvest in the three major producing nations in South America coupled with domestic and international demand for soy oil and meal.

 

According to a release on May 15th by the National Oilseed Processors Association, whose members process 95 percent of the U.S. crop, 169.8 million bushels of soybeans were crushed in April 2023, the second highest crush for this month recorded but lower than the consensus of estimates averaging 171.8 million bushels. Crush volume was down 6.6 percent from the previous month of March 2023, at 181.8 million bushels.

 

On May 24th the CME spot price for soybean oil was up 1.0 cent per lb. (2.1 percent) from the previous week to 47.9 cents per lb. Prices for vegetable oils have fluctuated over past weeks but with supplies in excess of demand especially for Asian palm oil. 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 May 24th, the soybean meal spot price quoted on NASDAQ was $402 per ton, $23 per ton lower than the spot price last week and compared to a 52-week range of $378 to $496 per ton.

 

On May 24th Meat and Bone meal was priced over a range of $440 to $525 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 May 24th the conversion of the CNY to the BRL was BRL 0.70 unchanged from last week. The conversion of the CNY to the US$ was CNY 7.10, down CNY 0.10 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 12th 2023 WASDE #636, the USDA quarterly Grain Stocks Report and the USDA Grains and Oilseeds Outlook posted under the STATISTICS Tab.

 

Following extension of the Black Sea Grain Initiative (BSGI) there is 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 through late March, 24 million tons of grains were exported through the Black Sea Corridor. is unknown whether the United Nations negotiators relaxed sanctions on exports of Russian agricultural commodities including fertilizer to achieve an extension of the BSGI.