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Commodity Report

06/07/2024

WEEKLY ECONOMY, ENERGY AND COMMODITY REPORT: June 6th 2024

 

OVERVIEW

Prices for corn, soybeans and soybean meal were changed only fractionally this past week. Prices were influenced by technical selling arising from geopolitical concerns, estimates of domestic U.S. availability and revised projections for crop sizes in Brazil and Argentine. Secondary factors included disruption in shipping in the Red Sea and Panama Canal, carryover from the 2023 U.S. crop, export orders and the predicted ending stocks of corn and soybeans for the 2024 crop.  The May WASDE Report updated production forecasts and prices based on planting approaching the midway mark, and the transition to a La Nina event possibly by the third quarter.

 

At 12H00 EDT on June 6th the CME price for corn was up 0.2 percent compared to the previous week to 450 cents per bushel for July delivery. Corn price was influenced by ethanol demand and the proportionally high ending stock from the 2023 crop. Export orders for the current market year have increased in response to lower prices.  Volumes and prices are indirectly influenced by higher wheat prices, events in the Black and Red Seas. Orders by China resumed at the end of the 2022-2023 market-year and have extended through May despite a moderately higher Dollar Index and increased ocean freight but offset by a low FOB prices. Total exports for the current market year are 23.9 percent higher than for the corresponding week during the 2022-2023 year.

 

Soybeans traded at 1,202 cents per bushel for July 2024 delivery, down 0.3 percent over the week. Slightly higher prices were attributed to trading, less farm selling and projections of availability from the 2024 Brazil and Argentine harvests. Total exports for the current market year are 17.4 percent lower than for the corresponding week in the 2022-2023 year.

 

 

Soybean meal traded at $363 per ton for July delivery, down 0.3 percent. Price was influenced by demand coupled with high crush volumes for consecutive months from December 2023 through March 2024. Price will fluctuate to reflect the CME price for soybeans and the demand for biodiesel despite the adverse financial situation in this sector. The market previously responded to the increased 2023 crop and higher stocks together with projections for 2024 in the extensively revised May WASDE Report .

 

 WTI was $4.75 (-6.0 percent) lower from last week to $74.48 on June 5th. Price is down on the balance between supply and demand. The reduction in attacks on shipping in the Red Sea is due to diversion from the Suez Canal.  It is evident that U.S. production is a moderating influence on price, attaining 12.9 million barrels per day in March with ample reserves. An upward trajectory in price may occur if production cuts by OPEC amounting to 2 million barrels per day and extended through June actually materialize. There was a slight downward movement in price during the week (range $78.53 down to $73.33). Crude oil inventory in the U.S., other than the Strategic Reserve, was down 0.4 percent to 35.4 million barrels last week. High U.S. production is constraining domestic and international prices and the recent decline in energy cost during past three weeks is reflected in deflation possibly influencing the FOMC in their eventual lowering the benchmark interest rate.

 

Economic data released over the past three weeks (Q1 GDP; PCE, Confidence, Productivity, Employment) confirmed slow growth of the economy but with a slight decline in the trajectory of inflation as noted in the minutes of the FOMC released May 22nd. The data-driven Federal Reserve FOMC passed on lowering the benchmark rate on May 1st and will be disinclined to reduce the 10-year rate until September at the earliest.

 

Factors influencing commodity prices in either direction over the past four

 weeks included:-

 

  • Weather conditions in areas of the World growing corn and oilseeds especially in Brazil and also Argentine with favorable rain recently under the influence of a strong El Nino event. The 2023 U.S. harvest was completed ahead of the corresponding weeks in 2022 with higher carryover and lower exports of soybeans. (Downward pressure on prices).  Harvesting in South America is advanced for the “new” crop of 2024 but has been disrupted by flooding in the southern production states mainly affecting Rio Grande do Sul where up to 25 percent of crops may have been lost.

 

  • Geopolitical considerations continue to move markets, especially in the Mideast. Ongoing attacks on Ukraine port facilities have impacted prices of wheat, corn, oilseeds and vegetable oils. Loaded bulk vessels are sailing from Black Sea and Danube River ports using the ‘Humanitarian Corridor” to various destinations. This route is operational despite threats by the Russian Federation to mine the entrance to ports and deployment of airborne missiles.  Exports from Ukraine are approaching 1.5 million metric tons per week with a total of 26 million metric tons market year through February, down 11 percent from the equivalent period for 2022-2023 year. Grain production in Ukraine during the current year will be lower than 2022/2023 (Downward pressure on corn and wheat and an indirect effect on soybeans)

 

  • Macroeconomic U.S. factors:-

 

  • Most economists in academia and the private sector are still confident of a “soft landing” for the economy despite the release of the Q1 2024 GDP and recent economic parameters including the ECI, CPI and PPI and with fluctuation in bond rates. Annual inflation as measured by CPI declined from 8.9 percent in June 2022 to 3.5 percent in March 2024. This is in part a response to a series of 11 FOMC rate raises that curbed inflation and cooled the labor market but without precipitating unemployment. There is evident stability in the bank sectors in both the U.S. and Europe. 

 

  • The Federal Reserve held the benchmark interest rate steady at the monthly FOMC meeting on May 1st 2024, the sixth sequential pause.  The Federal Reserve commentary indicated that the rate would be held at 5.25 percent until a pivot with possibly less than two reductions of 25 basis points each in 2024, after the September meeting at the earliest. Chairman Powell in Congressional testimony and documented in FOMC minutes has indicated that decisions would be based on demonstrated progress in reducing inflation as confirmed by a basket of key economic data, towards an annual 2.0 percent target by mid-2025. Market optimism with projections of five reductions during 2024 was evidently premature.

 

  • The May 30th Bureau of Economic Affairs release documented the second estimate of Q1 2024 GDP at 1.3 percent, below the April advanced estimate of 1.6 percent. The Q1 GDP value was influenced by spending by both consumer and government-sectors and with higher investment in housing. By comparison Q4 2023 GDP growth was 3.4 percent. Growth in GDP attained 2.5 percent in 2023 up from 1.9 percent in 2022. The Personal Consumption and Expenditure Index For Q1 (excluding food and energy) was up 2.0 percent. The May 24th advanced estimate of Q2 GDP was 3.5 Percent.
  • The May 31st Bureau of Economic Analysis released the April Personal Consumption and Expenditure Price Index. The core index (excluding food and energy) was up 0.2 percent from the previous month and 2.8 percent year-over-year. This was in line with estimates. The Headline PCE Index was up 0.3 percent over the previous month and 2.7 percent year-over-year. On a monthly basis the price of goods was up 0.2 percent, services were up by 0.3 percent, food down by 0.2 percent and energy up by 1.2 percent. The headline PCE is closely followed by the Federal Reserve and confirms persistent inflation holding above an annual target of 2.0 percent.

 

  • The May 15th Bureau of Labor Statistics release of the April 2024 CPI confirmed a 0.3 percent increase from March, 0.1 percent below forecast. The annual increase of 3.4 percent was unchanged from  March and consistent with the anticipated value. The increase in the core value (excluding food and energy) was up 0.3 percent from March and 3.6 percent for the 12-month period. Food at home was down 0.2 percent from the previous month. The category of ‘meat, fish and poultry’ was down collectively by 1.0 percent from the previous month. Food away from home was up 0.3 percent from March.  On an annual basis all food was up 2.2 percent with food at home up 2.2 percent and food away from home up 4.1 percent. Energy was up 2.1 percent due to gasoline (+1.2) and electricity (+5.1) offset by natural gas (-1.9 percent) in April. The shelter category was up 0.4 percent for the month and 5.5 percent over the past year. The macro trend is inclining towards reduced inflation but restrained by to a rise in energy prices detracting from deflation. The CPI heavily influences FOMC rate decisions.

 

  • The April Producer Price Index for Final Demand (PPI) released on May 14th was up by 0.5 percent from March compared to an expectation of 0.3 percent. The PPI was up 2.2 percent over the past 12-months. This is compared to a 6.4 percent increase in 2022. The core PPI value excluding volatile fuel and food, was up 0.5 percent for April compared with 0.4 percent for March and up 3.1 percent for the 12-month period. Food was down 0.7 and energy up 2.0 percent respectively.

 

  • A Federal Reserve release on May 16th confirmed that industrial production fell 0.3 percent in April. Capacity utilization was unchanged at 78.4 percent, 1.2 percent below the 1972-2020 average.

 

  • The May 24th report by the Census Bureau on Durable Goods Ordered during April 2024 was higher by 0.7 percent to $284 Billion compared to a revised value of 0.8 percent or $282 Billion in March. Transportation and specifically aircraft orders were up 1.2 percent. Excluding the Transportation component, new orders increased by 0.4 percent in April compared to March. Shipments of durable goods up 2.4 percent from March that registered a 1.5 percent decline.

 

  • The May 15th release of retail and food sales data showed a monthly rise of 0.4 percent in April down from 0.7 percent in February. Retail sales in April 2024 were up 3.0 percent from the corresponding month in 2023. The Federal Reserve FOMC closely monitors retail sales as a measure of the trend in inflation.

 

  • The June 3rd release by the Institute for Supply Management (ISM®) recorded a fall in the Manufacturing Index for May at 48.7 down from 49.2 in April and further below the bifurcation point between contraction and expansion of 50.0. New Orders fell to 45.4 (49.1, April) and Production attained 50.2 (51.3 April).  The Prices Index fell to 57 in may, down from 60.9 in April denoting lower costs for production. U.S manufacturing continues to contract responding to prolonged high benchmark interest rates.

 

  • On April 30th the U.S. Bureau of Labor Statistics reported a 1.2 percent increase in the Employment Cost Index (ECI) over the 1st quarter of 2024 against a consensus estimate of 0.9 percent.  The year-over-year increase was 4.4 percent compared to an estimate of 4.0 percent and with benefit costs up by 3.7 percent. The March ECI of 1.2 percent compares with a value of 0.9 percent for the 4th quarter of 2023. The ECI is closely followed by the Federal Reserve FOMC and further reduces the possibility of a rate cut before September at the earliest.

 

  • The May 24th release of the S&P Global Composite U.S. Manufacturing PMI for May rose to 54.4 compared to revised 51.3 in April. This was the highest rise since April 2022.

 

  • The Conference Board Consumer Confidence Index released on May 28th for April through May, rose unexpectedly to 102.0 points from a revised 97.5 for the preceding four-week period. The index was higher than a Reuters consensus estimate of 95.9. The Present Situation Index was higher to 143.1 in May compared to 142.9 in April. The Expectations Index gained 8.4 percent to 74.6 from a revised 68.8 in April. Values below 80.0 suggest a future recession. Confidence improved over the past four weeks after three successive monthly declines.

 

  • The May 10th University of Michigan Preliminary Index of Consumer Sentiment for May fell sharply by 9.8 points to 67.4 for May, down from a revised value of 77.2 in April.  The Index was up 14.0 percent from the corresponding period in 2023. Both the Current Economic Index (68.8 down from 79.0 in April) and the Index of Consumer Expectations (66.9 down from 76.0 in April) denote a decline in consumer sentiment influenced by stable but high interest rates and inflation despite geopolitical concerns. Inflation expectations 12-months hence moved higher from 3.2 to 3.5 percent among those surveyed.

 

  • Non-farm payrolls added 272,000 in May, as documented by the Bureau of Labor Statistics in a June 7th release. This was unexpectedly more than the anticipated 190,000 projection, and should be compared to the revised April value of 165,000. The substantial increase was attributed to workers hired in the education, health care and government sectors. The unemployment rate rose to 4.0 percent from  3.9 percent with 6.5 million unemployed . Real average hourly earnings during May showed a 0.4 percent increase over April to $34.95.  Labor participation was almost unchanged at 62.5 percent in May. Wage rates have  increased 4.1 percent over 12-months, the lowest gain since June 2021. Wage rates are closely followed by the Federal Reserve FOMC.

 

  • The Bureau of Labor Statistics Job Openings and Labor Survey report released on June 4th estimated 8.06 million job openings at the end of April, compared with the revised March value of 8.35. The April job openings number was the lowest value since February 2021 and compares with the March 2022 value of 12.2 million job openings during COVID. The hiring rate was 3.6 percent (5.6 million hires) with an April quit rate of 2.2 percent both values unchanged from March.

 

  • The seasonally adjusted initial jobless claims figure of 229,000 released on June 6th for the week ending June 1st increased by 10,000 from the previous week and represented a four-week high. The Weekly value was higher than the Reuter’s estimate of 219,000. The four-week moving average was 222,250. The Bureau of Labor Statistics estimated 1.790 million continuing claims for the week ending May 18th. There is evidence from data over the past three months that the labor market is cooling, although still tight, despite sporadic weekly fluctuation in new claims.

 

  • The June 6th Bureau of Labor Statistics report recorded a revised 0.2 percent increase in non-Farm Productivity for Q1 2024 down from 0.7 percent in Q4 2023. Labor cost increased 4.0 percent annualized, down from an initial estimate of 4.7 percent.

 

  • The ADP® reported on June 4th that private payrolls increased by 152,000 in May, down 36,000 from the revised 188,000 in April and compared to the Dow Jones estimate of 175,000 jobs. The increase in employment was mostly in the health, services and hospitality sectors with 149,000 positions while manufacturing lost 20,000 slots. Annual pay was up 5.0 percent year-over-year, for the third successive month and the lowest value since August 2021. The increase will not directly influence the probability of short-term future changes in interest rate since the ADP® is regarded as less reliable by the FOMC than the Bureau of Labor Statistics Monthly non-farm payroll report.

 

FACTORS INFLUENCING COMMODITY PRICES

 

  • The May 10th WASDE projected acreage to be planted, yields, crop size and ending stocks for the 2024 crop.

 

  • It is evident that both polarization in the closely divided chambers of Congress and intra-party conflict between and within both sides of the aisle in the House delayed adoption of appropriations bills. Passage of the 2023 Farm Bill will be contentious and is subject to a 12-month extension as a stop-gap measure. Progress on the 2023 Farm Bill has been impeded by contention over SNAP eligibility and other entitlements that collectively represent 75 percent of total expenditure. The August 2nd downgrade of U.S. debt from AAA to AA+ by Fitch Ratings recognizes Congressional dysfunction. On November 10th 2023 Moody’s downgraded U.S. credibility from ‘stable’ to ‘negative’ based on an inability to pass required fiscal legislation. After four Continuing Resolutions the House and Senate passed six appropriations bills including the FDA and USDA, avoiding a March 8th partial shutdown of the Federal Government. Agreement was concluded on the remaining appropriations bills on March 23rd maintaining Federal funding through October 2024. Currently the position of the Speaker of the House is more secure suggesting progress in passing needed legislation in the succeeding weeks of the 118th Congress.

 

  • The delayed 2023 Farm Bill is mired in conflict in both the House and Senate. Despite the markup of the House version. There is no consensus on major issues comprising the magnitude of SNAP payments and eligibility, allocation of funds for climate remediation and requested price supports for crops. The Chair of the Senate Agriculture Committee Sen. Debbie Stabenow (D-MI) is standing firm on maintaining both SNAP-WIC benefits and climate remediation even if the Farm Bill is delayed through to the 119th Congress. There is no confirmation that funding will be available for crop support payments as included in the House version.  

 

  • The May 10th WASDE #648 Projected both corn and soybean production parameters with a potential record soybean harvest for the 2024 crop. There will be ample world availability of ingredients although inequitable distribution will result in shortages in some nations. Soybean exports will comprise 38.0 percent of the 2024 U.S. crop with a 30.7 percent increase in ending stock to 445 million bushels as compared to the April WASDE Report.  The projection of corn exports suggests that exports will amount to 13 percent of the2024 crop with ending stocks down 0.9 percent to 2,102 million bushels.

 

  •  Rabobank projected the soybean crop in Brazil at 153 million metric tons on April 4th albeit before flooding. This value is higher than the projection by CONAB (the Soy production association in Brazil) at the midpoint of the soybean harvest, of 147 million metric tons  (5,401 million bushels) down from a previous estimate of 155 million metric tons (5,695 million bushels). Exports of 100 million metric tons (3,674 million bushels). It is anticipated that Brazil will crush 56 million metric tons (2,057 million bushels). If CONAB is correct the harvest will be 7 million metric tons (269 million bushels) lower than the 2023 record crop. Brazil exported 7.0 million metric tons (257 million bushels) of soybeans to China over the first two months of 2024, double the quantity shipped to this nation over the corresponding two months in 2023.

 

  • Corn production in Brazil for the 2023-2024 market year will attain 124 million metric tons (4,801 million bushels) from all three sequential harvests. But down seven percent from the previous year. Brazil is projected to export of 54 million metric tons (2,125 million bushels). Argentine will produce 50 million metric tons of corn (1,968 million bushels), double compared to the previous year impacted by drought. (Lower prices in the future subject to favorable reports on crop progress and actual harvests)

 

  • The Dollar Index (DXY) was 104.1 at close on June 5th, down 1.0 point from last week based on recent U.S. economic data suggesting a delay in lowering benchmark interest rates until the fall and prevailing high bond rates. The DXY has ranged from 99.0 to 107.0 over the past 52 weeks. The dollar index influences timing and volume of export orders and indirectly the price of WTI crude.

 

EXPORTS

 

The FAS Export Report for corn, released on June 6th for the week ending May 30th confirmed that outstanding export orders for corn amounted to 11.89 million metric tons (468.01 million bushels). Net orders for the past week for the 2023-2024 market year amounted to 1.18 million metric tons (46.48 million bushels) consistent with lower price. Shipments recorded during the past working week amounted to 1.49 million metric tons (58.61 million bushels). For the current market year to date cumulative export of 39.38 million metric tons (1,550 million bushels) is 23.9 percent higher compared to the equivalent week of the previous market year. For market year 2024-2025 outstanding orders attained 2.91 million metric tons (114.58 million bushels) with 113,300 metric tons (4.46 million bushels) ordered this past week

(Conversion 39.36 bushels per metric ton.  Quantities in metric tons rounded to 0.1 million)

 

The FAS Export Report for soybeans covering the week ending May 30th reflecting market year 2023-2024, recorded outstanding export orders amounting to 3.42 million metric tons (125.76 million bushels). Net orders this past week attained 0.19 million metric tons (6.07 million bushels).  Shipments for the past working week attained 0.39 million metric tons (14.26 million bushels). For the current market year to date cumulative exports of 39.98 million metric tons (1,469 million bushels) are 17.4 percent lower compared to the equivalent week of the previous market year.  Outstanding orders for the 2024-2025 market year amount to 1.04 million metric tons metric tons  (38.10 million bushels) with 73,800 tons (0.27 million bushels) ordered this past week.

 (Conversion 36.74 bushels per metric ton)

 

For the week ending May 30th 2023 outstanding orders for soybean meal and cake attained 2.87 million metric tons. Net orders this week for soybean meal and cake amounted to 250,200 metric tons. During the past week 231,100 metric tons of meal and cake combined was shipped. The quantity of 9.46 million metric tons exported to date is 12.5 percent higher than the volume for the corresponding weeks of the previous market year. For the next market year outstanding sales have attained 473,800 metric tons with 4,100 tons ordered this past week.

 

The May 10th 2024 WASDE #648 projected:-

 

  • Corn area planted for all purposes in 2024 (‘new crop’) will attain 90.0 million acres, down 4.9 from last year. According to the May WASDE, yield was projected at 181.0 bushels per acre with a resulting production of 14,860 million bushels with 2,102 million bushels as ending stock. The USDA reduced the average ex-farm price to 440 cents per bushel for the 2024 crop.

 

  • Soybean area to be planted for 2024 will attain 86.5 million acres, up 3.5 percent from 2023. According to the May WASDE, yield was predicted at 52.0 bushels per acre with production of 4,450 million bushels with 445 million bushels as ending stock. The USDA reduced the average season price to 1,120 cents per bushel.

 

  • Crushers are expected to produce 57.08 million tons of soybean meal. Ending stocks will attain 400,000 tons. The USDA projected a lower season price at $330 per ton.

 

The preference for planting soybeans in 2024 was based on a favorable projection of the soy to corn benefit ratio despite lower prospects for exports but with higher domestic demand for crushing.

 

COMMODITY PRICES

 

The following quotations for the months of delivery as indicated were posted by the CME at 12H00 EDT June 6th 2024, compared with values at 12H00 on May 30th 2024  (in parentheses): -

COMMODITY

 

Corn (cents per bushel)

July     450       (449)

Sept.      456      (457)  

Soybeans (cents per bushel)

July  1,202    (1,209)

Sept.   1,171  (1,189)

Soybean meal ($ per ton)

July     363        (364)

Sept.      355      (358)

 

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

 

Corn:                   July quotation up 1 cent per bushel.               (+0.2 percent)

Soybeans:          July quotation down 7 cents per bushel        (-0.6 percent)

Soybean Meal:  July quotation down $1 per ton                       (-0.3 percent)

 

 

The CME spot prices for feedstuffs per short ton at close of trading on June 5th 2024 with prices for the previous week were:-

 

  • Corn (ZC): $158 per ton, was $163 per ton, down $5 per ton (-3.1 percent) from the previous week. 52-week range $149 to $233
  • Soybean Meal (ZM): $361 per ton, was $371, down $10 per ton (-2.7 percent) from the previous week. 52-week range $323 to $495

 

Values for other common ingredients per short ton:-

 

  • Meat and Bone Meal, (According to the USDA National Animal By-product Feedstuffs Report on May 31st. Porcine range $370 to $410 with an average of $392 per ton (ex MN), up $15 (+4.0 percent) from last week; Ruminant range $290 to $335 per ton (Av. $313 per ton) (ex MN) down $7 (-2.0 percent) from last week. Price varies according to plant and location  

 

  • According to the USDA National Mill-Feeds and Miscellaneous Feedstuffs Report on May 31st wheat middlings from St. Louis, MO. and other locations: $100 to $125 per ton (Av. $108 per ton) up $13 (+13.6 percent) from the previous week reflecting escalation in the price of wheat following a reduction in the size of the Baltic crop.

 

  • According to the National Grain and Oilseed Processor Feedstuffs Report on May 21st DDGS, (IA.) the range was $130 to $200 (Av. $158 per ton, down $3 per ton (-1.9 percent) from the previous week reflecting stable to slightly lower corn prices. The average Pacific Northwest price was $253 per ton. Price varies according to plant and location and is expected to fluctuate with the price of corn

 

  • University of Missouri Extension Service By-Product Feed Price Listing for April / May

 

  • Bakery Meal, (MO & TX): $150 per ton.

 

  • Rice Bran, (AR & CA): $120 to $200 per ton. (Av. $160).

 

 

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

 

There was a 1.0 cent per dozen decrease in the nest-run production cost for eggs this past week, compared to May 24th due to decreases in the spot prices of corn and soybean meal

 

ENERGY

 

A recent U.S. Energy Information Administration (U.S. EIA) report estimated that fuel ethanol blending would average 1 million barrels per day in 2024, up 2.0 percent from 2023. For the week ending May 24th, 93.1 percent (92.7 percent for the previous week) of the U.S. ethanol fermentation volume was operational, based on January 2023 U.S. EIA capacity of 1,152 million barrels per day. The outlook for increased production will depend on higher domestic demand, from a seasonal increase in driving and the emergency waiver to dispense E15 blend during summer. There are limited prospects to increase the quantity exported comprising approximately nine percent or the production equivalent to 2.8 days operation.

 

During March 2024  (the last month for which US Energy Information Administration data is available) ethanol exports were up 14.8 percent from the previous month to 162.2 million gallons (3.807 million barrels). Importing nations and regions of significance and their proportions of total volume (rounded) for the month included:-  34.6 percent to Canada;  13.4 percent to India; 23.2 percent to Europe; 10.0 percent to Central, South America and the Caribbean; 19.7 percent to Africa, Asia and the Middle East, predominantly South Korea and Singapore; 3.1 percent to Mexico.

 

According to the U.S. EIA, for the week ending May 31st 2024 the industry produced on average 1,072,000 barrels of ethanol per day, up 0.4 percent from the week ending May 24th and continuing above the one million gallon per day benchmark for the fourth consecutive week.

 

On May 31st ethanol stock was down 0.7 percent from the previous week to 23.1 million barrels, an approximately 23-day reserve. This past week demonstrated slightly higher demand for ethanol, given relative changes in the weekly production level (output up 0.4 percent and inventory down 0.7 percent over the most recent week)

 

Current Energy Prices:-

 

  • The price of WTI was down $4.75 per barrel, (-6.0 percent) to $74.48 per barrel at close on June 5th compared to the previous week. This represents the disparity between supply and demand despite rising inventory. WTI is up 4.1 percent year to date. Issues affecting price last week included an easing in the conflict premium for Middle East crude. Disruption of shipping in the Red Sea continues resulting in an escalation in bulk and liquid sea-freight.  OPEC+ responsible for 40 percent of world output announced production cuts amounting to 3.7 million barrels per day or two percent of supply commenced in July 2023. Reductions have been ignored by Russia, Iraq and Kazakhstan in addition to a voluntary 2.2-million barrel per day reduction by Saudi Arabia announced on June 4th and extended through June 2024. The Economist (June 1st 2024) suggests widespread cheating. At the April 3rd OPEC+ Meeting Ministers decided to retain current supply policy and encouraged compliance by members with respect to supply cuts.  Global demand other than China will increase during summer months.  Decreased supply is expected fro from Nigeria and Sudan offset by increased exports of oil-sand product from Canada and shale product from Argentine.

 

The ending stock of crude held at Cushing OK. on May 31st was down 0.4 percent from last week to 35.4 million barrels and 17.4 percent down from the annual high on June 23rd 2023. Hydrocarbon sources of energy contributed materially to inflation in the third quarter compared to the previous quarter of 2023 but was an important contributor to deflation in the fourth quarter of 2023. On May 31st Baker Hughes reported 600 rigs were in operation in the U.S. unchanged from May 24th 2024 and compared to 696 during the corresponding week in 2023. U.S. crude production will average 13.2 million barrels per day in 2024. Consensus estimates for WTI price through 2024 average $83.78.

 

  • Ethanol quoted on the CME (EH) on June 5th was priced at $2.16 per gallon, unchanged for months due to lack of trading activity. The 52-week range is $2.14 to $2.19 per gallon.

 

  • On June 5th RBOB gasoline traded on NASDAQ (RB) at $2.33 per gallon, down 13 cents (-5.3 percent) from the previous week. Despite the lower price this past week rises will become more evident in CME trading and ultimately at the pump as demand increases during summer. The 52-week range for RBOB gasoline is $1.98 to $2.96.

 

  • The AAA national average regular grade gasoline price was $3.50 per gallon on June 5th, down 8 cents (-2.2 percent) from last week. Gasoline is now $1.34 per gallon more expensive than ethanol but has a 63 percent higher BTU rating. Future rises in fuel cost are inevitable given the prospects for a rise in benchmark WTI

 

  • The AAA national average diesel price was $3.84 per gallon on June 5th, down 4 cents (-1.0 percent) from the previous week but with prospects for future increases due to an extremely low national stock and the rising price of WTI. Increases are currently restrained by a decline in the trucking industry.

 

  • CME Henry Hub natural gas was priced at $2.77 per MM BTU on June 5th up 11 cents (+3.8   percent) from the previous week on lower demand attributed to milder weather. Gas prices are depressed following an Administration embargo on new LNG export terminals.

 

INGREDIENTS

 

DDGS is freely available with most plants among the 192 operational on January 1st 2023 (the last available estimate) with a combined capacity of 1,152 million barrels per day functioning at a reduced national average 93.1 percent compared to 92.7 percent last week. The May 31st USDA National Grain and Oilseed processor Feedstuffs Report priced DDGS from Iowa plants at $130 to $200 per ton, with an average of $158 per ton. 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 2024 delivery at 12H00 on June 6th was down 0.2 percent to 1,202 cents per bushel. The current price of soybeans is a reflection of availability for domestic crushing to produce oil, consumption and export orders. Soybean meal was down 0.3 percent on the CME to $363 per ton for July 2024 delivery. Prices of soybeans are obviously influenced by projections of harvest in the three major producing nations in South America, the projected 2024 harvest in the U.S. coupled with domestic demand for soy oil, biodiesel and meal.

 

According to a release on May 16th by the National Oilseed Processors Association, whose membership processes 95 percent of the U.S. crop, the soybean crush for April 2024 was unexpectedly low at 166.0 million bushels of soybeans, and below the consensus estimate of 183.1 million bushels. The April crush was down 15.5 percent from the March record of 196.0 million bushels and down 4.2 percent from April 2023 despite higher capacity. May crush data will be posted in the June 21st 2024 edition of EGG-NEWS.

 

On May 29th the CME spot price for soybean oil was down 2.2 cents per lb. (-4.8 percent) from the previous week to 43.4 cents per lb. Prices for vegetable oils have fluctuated over a narrow range in past weeks but have generally fallen with recent higher supply. Asian crude palm oil was also lower this past week on profit taking. It is anticipated that 41 percent of U.S. soy oil was diverted from fuel to biodiesel during 2023 and this proportion will be exceeded in 2024 paralleling the situation in Brazil.

 

On June 5th the CME soybean meal spot price was $361 per ton, $10 per ton lower than the spot price last week and compared to a 52-week range of $323 to $495 per ton.

 

On May 31st Meat and Bone meal (ruminant) was quoted over a range of $290 to $335 per ton (Av. $313 per ton) and porcine over a range of $370 to $410 per ton with an average of  $392 per ton according to the USDA National Animal By-product Feedstuffs Report, unchanged from last week. Prices quoted were for Minnesota plants but with a wide range based on composition, source and location. Price fluctuation reflects changes in soybean meal and other oilseed meals.

 

On June 5th conversion of the CNY to the BRL was BRL 0.73, unchanged from last week. The conversion of the CNY to the US$ was CNY 7.14, down CNY 0.11 from the previous week consistent with a slight increase in the Dollar Index.

 

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 2022-2023 market year net export sales of soybeans were down 5.6 million metric tons (206 million bushels) compared to the previous market year with cumulative exports of 51.5 million metric tons (1,893 million bushels)

 

For Market year 2022-2023 ending September 2023, a record 13.2 million metric tons of soybean meal and cake was exported valued at $7 Billion. Expansion in exports was attributed to orders from The E.U., Asia (Viet Nam) and Latin America. Crush volume was driven by the demand for soy oil to produce biodiesel fuel.

 

During calendar 2023, 46.0 million metric tons (1,810 million bushels) of corn were exported from the U.S., valued at $13,140 million. The top five importers with their respective values expressed as a percentage were:- Mexico, 40.9; Japan, 15.8; China, 12.5; Colombia, 8.6 and Canada, 5.1.

 

During calendar 2023, 49.0 million metric tons (1,800 million bushels) of soybeans were exported from the U.S., valued at $29,910 million. The top five importers with their respective values expressed as a percentage were:- China, 50.6; E.U., 12.0; Mexico, 9.3; Japan, 4.3; Indonesia, 4.1; Taiwan, 2.0 and Egypt, 1.6.

 

COMMENT

 

Subscribers are referred to the preliminary USDA projection for 2024 harvests included in the May 10th WASDE #648, under the STATISTICS tab. The USDA Planted Acreage Report and the quarterly Grain Stocks Report are posted under the STATISTICS Tab.

 

Following cancellation of the Black Sea Grain Initiative (BSGI) Ukraine commenced limited shipment of commodities from the three main Black Sea and Danube Delta ports that remain functional. Projected harvest 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.

 

Either more intense action by Ukraine, a negotiated peace treaty with concessions to the Russian Federation, or their combination will be required to restore unrestricted shipping in the Black Sea. Increasing passage along the costal-route (“Humanitarian Corridor”) has allowed sea-transport of commodities since early August to supply Asia and Africa.

 

Increased multinational naval activity has commenced in the Bab al-Mandeb Strait at the southern end of the Red Sea to restore shipping through the Red Sea and the Suez Canal that carried 15 percent of world sea-freight. Nearly all shipping lines including Maersk of Denmark, Hapag-Lloyd of Germany and CMA of France have suspended transit of the Suez Canal and the Red Sea awaiting a clear resolution of the danger from missiles. Traffic through the Suez Canal is down over 60 percent from September 2023 creating a fiscal problem for Egypt. Restoring free passage will require destruction of Houthi bases, radar and command installations and mobile launching equipment on the soil of Yemen in addition to interdicting re-supply from Iran. This is in progress.