Share via Email


* Email To: (Separate multiple addresses with a semicolon)
* Your Name:
* Email From: (Your IP Address is 44.213.60.33)
* Email Subject: (personalize your message)


Email Content:

Commodity Report

07/03/2024

WEEKLY ECONOMY, ENERGY AND COMMODITY REPORT: JULY 5th 2024.

 

OVERVIEW

 

Prices for corn and soybeans diverged substantially this past week. Prices were influenced by weather conditions with searing heat in the Midwest followed by torrential rains and flooding over two consecutive weeks in some states. There was some technical selling arising from geopolitical concerns and over revised projections for harvests in Brazil and Argentine. Contributory 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 June WASDE Report contained essentially unchanged values from the extensively revised May Report. Planting is complete and with the transition to a neutral phase a La Nina event is expected during the third quarter. The July WASDE should provide updated projections on yields, exports and prices that should for the 2024 season.

 

At 16H00 EDT on July 3rd the CME price for corn was down 2.9 percent compared to the previous week to 404 cents per bushel for July delivery. Corn price was influenced by acreage planted, 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 price are indirectly influenced by wheat availability as influenced by weather the Black Sea crop and events in the Red Sea. Orders by China resumed at the end of the 2022-2023 market-year and continued through June 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 26.3 percent higher than for the corresponding week during the 2022-2023 year.

 

Soybeans closed at 1,177 cents per bushel for July 2024 delivery, up 2.0 percent over the week. Higher prices were attributed to export orders, trading, more farm selling and projections of availability from the 2024 Brazil and Argentine harvests. Total exports for the current market year are 16.5 percent lower than for the corresponding week in the 2022-2023 year.

 

Soybean meal closed at $371 per ton for July delivery, up 2.8 percent. Price was influenced by demand coupled with high crush volumes for consecutive months from December 2023 through May 2024 inclusive. 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 essentially unchanged in June.

 

On July 3rd (09H00) WTI was $2.50 (+3.1 percent) higher from last week to $83.40. Price stability indicated a balance between supply and demand despite geopolitical uncertainties and tensions persisting in the Middle East. The reduction in attacks on shipping in the Red Sea is due mostly to fewer vessels transiting the waterway to and from the Suez Canal. It is evident that U.S. production is a moderating influence on price, attaining an average of 13.2 million barrels per day in March with ample reserves. An upward trajectory in price will occur if production cuts by OPEC amounting to 2 million barrels per day and extended through July actually materialize. There was a rise in price during the week with a range of $80.90 to $84.70 per barrel. Crude oil inventory in the U.S., other than the Strategic Reserve, was up 1.0 percent to 34.2 million barrels last week. High U.S. production is constraining domestic and international prices. The recent decline in energy cost during the past month is reflected in deflation possibly influencing the FOMC in their eventual lowering of the benchmark interest rate.

 

Economic data released during the past quarter (Q1 GDP; PCE, Confidence, Productivity, Employment) confirmed slow growth of the economy but with a downward trajectory in inflation The data-driven Federal Reserve FOMC passed on lowering the benchmark rate on June 12th and Federal Reserve Chair Jerome Powell and Reserve Bank Governors indicated one reduction in the 10-year rate during 2024 in the fall. Economists are now suggesting that the Fed is “behind the curve” again on adjusting rates downward with a high expectation of a 25 basis points reduction at the September meeting.

 

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

  • Weather conditions in the Midwest over the past three weeks have raised questions over the size of the 2024 harvest. Unseasonal heat reduced growth and quality in early to late-June followed by heavy rain and flooding in mid-month. The July WASDE should provide an adjustment of acreage of corn and soybeans to be harvested and their respective yields
  • Weather conditions in areas of the World growing corn and oilseeds especially in Brazil and also Argentine provided favorable rain recently under the influence of a strong El Nino event that has now officially ended. (Downward pressure on prices). Harvesting in South America was advanced for the “new” crop of 2024 but was 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 and Baltic regions. 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. Grain production in Ukraine during the current year will be lower than for 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 evident unemployment. There is obvious stability in the bank sectors in both the U.S. and Europe. Recent lower energy prices are contributing to deflation.
  • The Federal Reserve held the benchmark interest rate steady at the monthly FOMC meeting on June 12th, the seventh 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 June 12th Bureau of Labor Statistics release of the May 2024 CPI confirmed that there was no increase from April, 0.1 percent below forecast. The annual increase of 3.3 percent was lower than the 3.4 percent projection. The increase in the core value (excluding food and energy) was up 0.2 percent from April and 3.4 percent for the 12-month period, both down 0.1 percent from estimates. Food at home was unchanged from the previous month. The category of ‘meat, fish and poultry’ was up collectively on a seasonally adjusted basis by 0.2 percent from the previous month and 2.4 percent for the year. Food away from home was up 0.4 percent from April. On an annual basis all food was up 2.1 percent with food at home up 1.0 percent and food away from home up 4.0 percent. Energy was down 2.0 percent due to gasoline (-3.6), electricity (unchanged) and natural gas (-0.8 percent) in May. The shelter category was up 0.4 percent for the month and 5.4 percent over the past year. The macro trend is inclining towards reduced inflation but constrained by the shelter category that is detracting from deflation. The CPI heavily influences FOMC rate decisions.
  • The June 27th release by the Bureau of Economic Affairs documented the third and final estimate of Q1 2024 GDP at 1.4 percent, above the May advanced estimate of 1.3 percent. The Q1 GDP value was influenced by increased imports and a fall in business inventories responsible collectively for a reduction in GDP of 1.2 percent. 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 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 Producer Price Index for Final Demand (PPI) released on June 13th was down 0.2 percent from April compared to an expectation of a 0.1 percent increase. 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 unchanged from April and up 3.2 percent for the 12-month period. Food was down 0.1 and energy down 4.8 percent respectively from the previous month.
  • A Federal Reserve release on June 18th confirmed that industrial production rose 0.9 percent in May. Capacity utilization was slightly higher at 78.7 percent, 0.9 percent below the long run 1972-2020 average.
  • The June 27th report by the Census Bureau on Durable Goods Ordered during May 2024 was higher by 0.1 percent compared to a revised value of 0.2 percent in April. Computers and related equipment were up by 1.3 percent; Transportation and specifically defense aircraft orders and parts were up 22.6 percent. Excluding the Transportation component, new orders decreased by 0.1 percent in May compared to April against an expectation of a 0.5 percent decline.
  • The June 18th release of retail and food sales data showed a monthly rise of 0.1 percent in May down from a revised 0.2 percent in March mainly due to lower gas prices. Retail sales in May 2024 were up 2.3 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 June 21st release of the Headline S&P Global Composite U.S. Manufacturing PMI for June rose to 54.6 compared to revised 54.5 in May. This was the highest rise since April 2022.
  • The Conference Board Consumer Confidence Index released on June 25th for June, fell inconsequentially to 100.4 points from a revised 101.3 for the preceding four-week period. The index was lower than a Reuters consensus estimate of 100.0. The Present Situation Index was higher to 143.5 in June compared to 143.1 in May. The Expectations Index fell 1.9 points to 73.0 from a revised 74.9 in May. Values below 80.0 suggest a future recession.
  • The June 14th University of Michigan Preliminary Index of Consumer Sentiment for June was not statistically lower by 3.5 points to 65.6, down from a forecast value of 77.1. The Index was up 2.2 percent from the corresponding period in 2023. Both the Current Economic Index (62.5 down from 69.6 in May) and the Index of Consumer Expectations (67.6 down from 68.6 in May) 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 3.3 percent among the 500 surveyed.
  • Non-farm payrolls added 206,000 in June, as documented by the Bureau of Labor Statistics in a July 5th This was higher than the anticipated 200,000, and should be compared to the revised May value of 218,000. The moderate increase was attributed to workers hired in the health care, government and construction sectors. The unemployment rate rose to 4.1 percent with 6.8 million unemployed and with 1.5 million in the long-term category. Real average hourly earnings during June showed a 0.3 percent increase over May to $35.00. Average hours worked increased 0.3 percent to 34.3 per week in June. Labor participation was almost unchanged at 62.6 percent in April. Wage rates increased 3.9 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 233,000 released on June 27th for the week ending June 22nd declined by 5,000 from the previous week. The weekly value was lower than the Reuter’s estimate of 235,000. The four-week moving average was 236,000. The Bureau of Labor Statistics estimated 1.84 million, (1.83 last week), continuing claims for the week ending June 15th. 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 June 12th 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
  • The delayed 2023 Farm Bill is mired in conflict in both the House and Senate. Despite the respective markup of the House and Senate versions. 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 There are now questions whether funding will be available for crop support payments as included in the House version.
  • The June 12th WASDE #649 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 2.2 percent increase in ending stock to 455 million bushels as compared to the May WASDE Report. The projection of corn exports suggests that exports will amount to 13 percent of the 2024 crop with ending stocks unchanged from May at 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 2024 wheat crop from Russia will be down 11.8 percent from 2023 to 80.7 million metric tons. This is due to severe weather during winter followed by drought. The deficit will place upward pressure on coarse grains
  • The Dollar Index (DXY) was 105.4 at close on July 3rd, down 0.7 point from last week based on recent U.S. economic data suggesting a cut in benchmark interest rate in September despite persistent high bond rates. The DXY has ranged from 99.6 to 107.3 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 July 5th for the week ending June 27th confirmed that outstanding export orders for corn amounted to 9.55 million metric tons (376.09 million bushels). Net orders for the past week for the 2023-2024 market year amounted to 0.36 million metric tons (10.53 million bushels) consistent with lower price. Shipments recorded during the past working week amounted to 0.89 million metric tons (35.18 million bushels). For the current market year to date cumulative export of 44.18 million metric tons (1,739 million bushels) is 26.3 percent higher compared to the equivalent week of the previous market year. For market year 2024-2025 outstanding orders attained 3.53 million metric tons (138.70 million bushels) with 311,500 metric tons (12.26 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 June 27th reflecting market year 2023-2024, recorded outstanding export orders amounting to 3.62 million metric tons (132.85million bushels). Net orders this past week attained 0.25 million metric tons (8.37 million bushels). Shipments for the past working week attained 0.38 million metric tons (11.16 million bushels). For the current market year to date cumulative exports of 41.17 million metric tons (1,513 million bushels) are 20.1 percent lower compared to the equivalent week of the previous market year. Outstanding orders for the 2024-2025 market year amount to 1.38 million metric tons metric tons (50.55 million bushels) with 150,300 tons (5.52 million bushels) ordered this past week.

 (Conversion 36.74 bushels per metric ton)

 

For the week ending June 27th 2023 outstanding orders for soybean meal and cake attained 2.69 million metric tons. Net orders this week for soybean meal and cake amounted to 212,900 metric tons. During the past week 200,300 metric tons of meal and cake combined was shipped. The quantity of 10.39 million metric tons exported to date is 9.7 percent higher than the volume for the corresponding weeks of the previous market year. For the next market year outstanding sales have attained 846,500 metric tons with 288,600 tons ordered this past week.

 

The June 12th 2024 WASDE #649 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 June 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 held 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, unchanged from may but up 3.5 percent from 2023. According to the June WASDE, yield was predicted at 52.0 bushels per acre with production of 4,450 million bushels with 455 million bushels as ending stock. The USDA held 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 16H00 EDT July 3rd 2024, compared with values at 14H00 on June 27th 2024 (in parentheses): -

COMMODITY

 

Corn (cents per bushel)

July 404 (416)

Sept. 405 (424)

Soybeans (cents per bushel)

July 1,177 (1,154)

Sept. 1,118 (1,136)

Soybean meal ($ per ton)

July 371 (361)

Sept. 332 (339)

 

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

Corn: July quotation down 12 cents per bushel. (-2.9 percent)

Soybeans: July quotation up 23 cents per bushel (+2.0 percent)

Soybean Meal: July quotation up $10 per ton (+2.8percent)

 

The CME spot prices for feedstuffs per short ton at 17H00 on July 3rd 2024 with prices for the previous week were:-

  • Corn (ZC): $150 per ton, was $156 per ton, down $6 per ton (-3.9 percent) from the previous week. 52-week range $149 to $233
  • Soybean Meal (ZM): $329 per ton, down $9 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 AnimalBy-product Feedstuffs Report on June 28th. Porcine range $340 to $400 with an average of $369 per ton down $6 per ton (-1.6 percent) from last week; Ruminant range $275 to $335 per ton (Av. $305 per ton) (ex MN) unchanged from last week. Price varies according to plant and location
  • According to the USDA National Mill-Feeds andMiscellaneous Feedstuffs Report on June 28th wheat middlings from St. Louis, MO. and other locations: $100 to $140 per ton (Av. $123 per ton) unchanged from the previous week.
  • According to the National Grain and Oilseed Processor Feedstuffs Report on June 28th DDGS, (IA.) the range was $135 to $165 (Av. $149 per ton, unchanged from the previous week reflecting stable to slightly lower corn prices. The average Pacific Northwest price was $248 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 June
  • Bakery Meal, (MO & TX): $150 per ton.
  • Rice Bran, (AR & CA): $120 to $200 per ton. (Av. $140).

 

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 June 27th 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 June 28th, 92.4 percent (90.5 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 12 percent or the production equivalent to less than four days operation based on April shipments.

 

During April 2024 (the last month for which US Energy Information Administration data is available) ethanol exports were up 34.1 percent from the previous month to 217.5 million gallons (5.106 million barrels). Importing nations and regions of significance and their proportions of total volume (rounded) for the month included:- 29.1 percent to Canada; 8.5 percent to India; 24.5 percent to Europe; 8.2 percent to Central, South America and the Caribbean; 28.4 percent to Africa, Asia and the Middle East, predominantly South Korea and Singapore; 4.6 percent to Mexico. Brazil with a high demand for fuel ethanol placed a tariff on U.S. ethanol to protect a growing domestic industry based on sugar cane. This nation imported 5.5 percent of April shipments

 

According to the U.S. EIA, for the week ending June 28th 2024 the industry produced on average 1,064,000 barrels of ethanol per day, up 2.0 percent from the week ending June 21st and continuing above the one million gallon per day benchmark.

 

On June 28th ethanol stock was up 0.7 percent from the previous week to 23.6 million barrels, an approximately 23-day reserve. This past week demonstrated lower demand for ethanol, given relative changes in the weekly production level (output up 2.0 percent and inventory up 0.7 percent over the most recent week)

 

Current Energy Prices:-

  • The price of WTI was up $2.50 per barrel, (+3.1 percent) to $83.40 per barrel at 09H00 on July 3rd compared to the previous week. The increase is in part due to the early onset and severity of Atlantic hurricanes foreboding disruptions in the Gulf during summer months. WTI is up 13.5 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. A voluntary 2.2-million barrel per day reduction by Saudi Arabia was announced on June 4th and extended through June 2024. Reductions have been ignored by Russia, Iraq and Kazakhstan, with The Economist (June 1st 2024) documenting 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 in the Northern hemisphere. Decreased supply is expected 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 June 28th was up 1.0 percent from last week to 34.2 million barrels and 20.1 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 June 28th Baker Hughes reported 581 rigs were in operation in the U.S. down 7 rigs from June 21st and compared to 674 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 July 3rd 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 July 3rd RBOB gasoline traded on NASDAQ (RB) at $2.60 per gallon, up 8 cents (+3.2 percent) from the previous week. Despite the lower price this past week escalation 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 $3.51 per gallon on July 3rd, up 2 cents (+0.6 percent) from last week. Gasoline is now $1.33 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 July 3rd up three cents (+0.8 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 $2.43 per MM BTU on July 3rd down 3 cents (-11.0 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. Warm weather has depressed demand

 

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 restored national average of 92.4 percent compared to 90.5 percent last week. The June 28th USDA National Grain and Oilseed processor Feedstuffs Report priced DDGS from Iowa plants at $135 to $165 per ton, with an average of $149 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 17H00 on July 3rd was up 2.0 percent to 1,177 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 up 2.8 percent on the CME to $371 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 June 17th by the National Oilseed Processors Association, whose membership processes 95 percent of the U.S. crop, the soybean crush for May 2024 was a record for the month at 183.6 million bushels of soybeans, and above the consensus estimate of 178.4 million bushels. The May crush was up 8.4 percent from April at an unexpected low of 169.4 million bushels and up 3.0 percent from May 2023 despite higher capacity.

 

On July 3rd the CME spot price for soybean oil was up by a substantial 4.3 cents per lb. (+9.9 percent) from the previous week to 47.9 cents per lb. Prices for vegetable oils have fluctuated over a narrow range in past weeks but the increase is attributed to higher demand. Asian crude palm oil was also higher this past week on reduced supply. 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 July 3rd the CME soybean meal spot price was $329 per ton, down $9 from the spot price last week and compared to a 52-week range of $323 to $495 per ton.

 

On June 28th Meat and Bone meal (ruminant) was quoted over a range of $275 to $355 per ton (Av. $305 per ton) and porcine over a range of $340 to $400 per ton with an average of $369 per ton according to the USDA National Animal By-product Feedstuffs Report. 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 July 3rd conversion of the CNY to the BRL was BRL 0.76, unchanged from last week. The conversion of the CNY to the US$ was CNY 7.2, down CNY 0.01 from the previous week despite a fall 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 70 percent from mid-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 will be a long process.