Weekly Commodity and Energy Report: June 2^nd 2023.

OVERVIEW

At close of trading on June 1^st CME corn was down 0.3 percent compared to the previous week to 589 cents per bushel for July delivery. The relatively unchanged value ignored large inter-day fluctuation influenced by perturbation in the wheat market, short covering before the Memorial Day weekend and concern over intermediate weather predictions. Prices have recovered from the Tuesday swoon despite the pace of planting and emergence predicting a large crop with high ending stocks projected for the 2023 season as documented in the May WASDE. Cancellation of orders by China has depressed prices with a contrary effect from higher ethanol production and demand.

Soybeans were almost unchanged from last week to 1,325 cents per bushel for July delivery. Soybean meal was up 0.3 percent to $399 per ton for July delivery. Price will fluctuate to reflect 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 11^th WASDE Report and the forecast 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 104.2.

WTI was 3.3 percent lower at $71.81 per barrel at close of trading on May 31^st despite the April announcement of an intended production cut by OPEC.

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

• Macroeconomic factors:-
• 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 10^th successive monthly FOMC meeting on May 3^rd 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. It is expected that the Fed. Will pause at the mid-June FOMC Meeting.
• On March 30^th 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. Initial projections for Q1 2023 GDP are for a 1.3 percent annualized rate.
• The April 2023 CPI (up 4.9 percent) and the revised March WPI (down to 2.7 percent) were lower than forecast. Non-farm payrolls increased to 339,000 during May as documented by the Bureau of Labor Statistics on June 2^nd with an unemployment rate rising to 3.7 percent from 3.4 percent in April. Jobless claims for the week ending May 29^th were 229,000.
• 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)

• An 11^th-hour compromise resulted in raising the debt ceiling given passage of the Fiscal Responsibility Act by the House on Wednesday May 31^st following extensive negotiations and a compromise on spending cuts. Resolution of the crisis was completed by action of the Senate in a June 1^st (Indirectly upward pressure by removing a threat to the U.S economy).

• 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.

• Dry weather is expected in the Midwest over the coming ten days. In contrast the remainder of the Nation will see precipitation. Rains have relieved drought on the Southern plains. Wheat yield and acreage will be sharply 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 18^th 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 constrained)

• The May 12^th 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 104.2 just below 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 June 2^nd for the week ending May 25^th reflecting market year 2022-2023, confirmed that outstanding export orders for corn amounted to 7.63 million metric tons (300.1 million bushels) with 30.5 million metric tons (1,202 million bushels) actually shipped. Net orders for the past week covering the 2022-2023 market year attained 0.19 million metric tons (7.4 million bushels). Shipment of 1.4 million metric tons (56.5 million bushels) was recorded during the past working week. For the current market year cumulative shipments of corn to date are 34.0 percent lower than for the corresponding week a year ago. For market year 2023-2024 outstanding sales this week amounted to 3.1 million metric tons (143.7 million bushels), with orders this week for the 2023-2024-market year amounting to 0.31 million metric tons (12.2 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 25^th reflecting market year 2022-2023, recorded outstanding export orders for soybeans amounting to 2.8 million metric tons (104.1 million bushels) with 48.1 million metric tons (1,768 million bushels) actually shipped. Net weekly soybean orders attained 0.12 million metric tons (4.5 million bushels) with 0.23 million metric tons (8.5 million bushels) shipped for the past week. For the current market year to date cumulative shipments of soybeans are 2.8 percent lower than for the corresponding week a year ago. Outstanding sales recorded for market year 2023-2024 amounted to 2.8 million metric tons (104.8 million bushels) with 0.3 million metric tons (11.1 million bushels) sold this past week. (Conversion 36.74 bushels per metric ton)

For the week ending May 25^th 2023 net orders of soybean meal and cake amounted to 405,400 metric tons for the market year 2022-2023. During the past week 259,300 metric tons of meal and cake combined was shipped, representing 3.2 percent of the total 8,210,600 metric tons exported during the current marketing year. This quantity to date is 2.5 percent higher than the volume for the corresponding period of the previous market year. For the next market year outstanding sales have attained 516,900 metric tons with 61,900 metric tons ordered this past week.

The annual 2023 USDA Prospective Plantings Report, and the May 12^th 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 11^thWASDE #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 close of trading on June 1^st 2023, compared with values at 15H00 on May 25^th 2023 (in parentheses): -

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

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

Soybeans: July quotation down 1 cents per bushel (<-0.1 percent)

Soybean Meal: July quotation up $1 per ton (+0.3 percent)

The NASDAQ spot prices for feedstuffs per short ton at close of trading on May 31st 2023 with prices for the previous week were:-

• Corn (ZC): $212 per ton was $210 (down 0.5 percent from the previous week). 52-week range $198 to $289
• Soybean Meal (ZM): $393 per ton was $402 (down 2.2 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 AnimalBy-product Feedstuffs Report on May 26^th): $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 andMiscellaneous Feedstuffs Report on May 26^th 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 31^st compared with May 24^th would decrease nest-run production cost for eggs by 0.5 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 88.8 percent (86.9 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 26^th 2023 the industry produced on average 1,004,000 barrels of ethanol per day. This was 2.1 percent up from the week ending May 19^th 2023 and restored weekly production to above the one million gallon per day benchmark. On May 26^th ethanol stock was up 1.3 percent from the previous week to 22.3 million barrels, fractionally higher than 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 31st was priced at $2.16 per gallon, up 2 cents (0.9 percent) higher than last week and resuming the price pertaining over previous months due to lack of trading. The 52-week range is $2.14 to $2.19 per gallon.
• On May 31^st RBOB gasoline traded on NASDAQ (RB) at $2.44 per gallon, down 18 cents (6.8 percent) from the previous week. The 52-week range for RBOB gasoline is $2.08 to $4.28.
• The CME WTI crude price is ignoring concern over possible lower supply due to announced OPEC production cuts and predictions for a World recession. Price was down $2.42 (3.3 percent) to $71.81 per barrel on May 31^st 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 $3.58 per gallon on May 31^st up 2.0 cents (0.6 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 $3.95 per gallon on May 31^st, down four cents per gallon (1.0 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 $2.26 per MM BTU on May 31^st down 32 cents per MM BTU (12.4 percent) from the previous week

INGREDIENTS

DDGS is freely available with most plants among the 192 operational on January 1^st 2022 (the last available estimate) with a combined capacity of 1,134 million barrels per day functioning at 88.8 percent. The University of Missouri Extension Service By-Product Feed Price Listing priced DDGS at $240 to $260 per ton on May 31st. 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 close of trading on June 1^st was down <0.1 percent to 1,325 cents per bushel compared to the previous week at 1,326 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 up 0.3 percent to $399 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 15^th 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 31^st the CME spot price for soybean oil was down 1.4 cent per lb. (2.9 percent) from the previous week to 46.5 cents per lb. Prices for vegetable oils have fluctuated over past weeks but with supplies in excess of demand especially for Asian crude palm oil at a 2-year low. 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 31^st the soybean meal spot price quoted on NASDAQ was $393 per ton, $9 per ton lower than the spot price last week and compared to a 52-week range of $378 to $496 per ton.

On May 31st 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 31^st the conversion of the CNY to the BRL was BRL 0.71 up CNY 0.01 from last week. The conversion of the CNY to the US$ was CNY 7.10, 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 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 12^th 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. It is unknown whether the United Nations negotiators relaxed sanctions on exports of Russian agricultural commodities including fertilizer to achieve an extension of the BSGI but the Russian Federation is negotiating for a relaxation of sanctions for a longer-term agreement. According to the Ukraine Grain Association 44 million metric tons of grain will be exported during the 2023/2024 season.