COMMODITY REPORT

02/02/2023

Weekly Commodity and Energy Report: February 2nd 2023.

 

OVERVIEW

At 14H00 on February 2nd CME corn was down 1.2 percent to 674 cents per bushel and soybeans increased 0.7 percent in price to 1,534 cents per bushel for March delivery compared to the previous week. Corn price was influenced by higher ethanol production and export demand. Soybean meal was 2.5 percent higher to $491 per ton for March delivery. The market has now discounted projections of crop size and lower ending stocks as documented in the January 12th WASDE #632. Commodity prices were influenced by a more moderate and stable Dollar Index of 102, possibly stimulating U.S. exports. Higher orders and shipments of corn to China and other importers were recorded by USDA-FAS during the past week following the holiday period.

 

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

  • Fears of a U.S. recession in 2023 have moderated. The Federal Reserve increased the benchmark interest rate by 25 basis points on February 1st but in the post-release commentary, Fed. Chairman, Jerome Powell suggested continued moderate increases for successive future rate settings by the FOMC to suppress inflation that he conceded was moderating. Equity markets have fluctuated during the past four weeks with inter-day closing prices up on sequential trading days this past week. On January 19th seasonally adjusted jobless claims for December 2022 were down 15,000 to 190,000 with 3.5 percent unemployment. The GDP for the fourth quarter of 2022 attained 2.9 percent. (Transitory downward pressure on markets)
  • Continuation in Federal funding was assured through passage of an 11th-hour $1.7 trillion omnibus spending bill passed on December 22nd. and enacted on December 29th. It is evident that polarization in Congress will result in future conflict over funding SNAP, raising the debt ceiling and agricultural legislation including the Farm Bill. (Ultimately, downward pressure).
  • A reduction in the December seasonally adjusted urban CPI to 0.1 percent unchanged from November compared to 0.8 percent in September and 0.4 percent in October indicate that inflation has plateaued. (Downward pressure)
  • Geopolitical tensions that impact wheat, corn, oilseeds and vegetable oil exports from Ukraine persist. Limited restoration of Black Sea shipping was accomplished following security guarantees by Ukraine to the Russian Federation but volume is deliberately restrained. Russia has inflicted extensive and deliberate damage on the agricultural and energy infrastructure of Ukraine including elevators and crushing plants. (Upward pressure on corn and wheat and an indirect effect on soybeans if Black Sea shipping is interrupted.)
  • There is an expectation of high soybean and corn harvests from Brazil for the 2022-2023 season although recent dry weather may have reduced yields. (Lower prices in the future subject to favorable reports on crop progress and actual harvests)
  • The Dollar Index (DXY) has ranged from 95 to 116 over 52 weeks and has recently shown less volatility. The DXY was at 101 on June 2nd peaking at 116 in late October but declining to 102 for the past four weeks. The dollar index influences timing and volume of export orders. (Fluctuation in corn and soybean prices, high value depresses U.S. sales)

 

EXPORTS

The restored and functional ‘legacy’ FAS Export Report released on February 2nd for the week ending January 26th reflecting market year 2022-2023, confirmed that outstanding export orders for corn amounted to 13.02 million metric tons (512.5 million bushels) with 12.6 million metric tons (496.0 million bushels) actually shipped. Net orders for the past week covering the 2022-2023 market year attained 1.59 million metric tons (62.7 million bushels) with 0.60 million metric tons (23.5 million bushels) shipped over the past working week. For the current market year outstanding sales of corn to date are 35.5 percent lower than for the corresponding week a year ago. For market year 2023-2024 outstanding sales this week amounted to 1.43 million metric tons (56.2 million bushels), with 0.16 million metric tons (6.4 million bushels) ordered for the 2023-2024-market year.

(Conversion 39.36 bushels per metric ton)

 

The FAS Export Report for the week ending January 26th reflecting market year 2022-2023, recorded outstanding export orders for soybeans amounting to 11.7 million metric tons (429.2 million bushels) with 35.6 million metric tons (1,307.5 million bushels) actually shipped. Net weekly soybean orders attained 0.74 million metric tons (27.0 million bushels) with 1.96 million metric tons (71.9 million bushels) shipped for the past week. For the current market year to date outstanding sales of soybeans are 1.9 percent lower than for the corresponding week a year ago. Sales recorded for market year 2023-2024 amounted to 0.72 million metric tons (26.4 million bushels) with sales of 0.19 million metric tons (7.1 million bushels) this past week. (Conversion 36.74 bushels per metric ton)

 

For the week ending January 26th 2022 net orders of soybean meal and cake amounted to 165,400 metric tons for the market year 2022-2023. During the past week 288,300 metric tons of meal and cake combined was shipped, representing 7.4 percent of the total 3,885,400 metric tons shipped during the current marketing year. This quantity is 92.2 percent of the volume shipped during the corresponding weeks of the previous market year. For the next market year outstanding sales attained 52,500 million metric tons with 42,000 metric tons sold this past week.

 

Projected harvests and ending stocks were documented in the January 12thWASDE #632, posted under the STATISTICS Tab. Corn yield attained 173.3 bushels per acre with a crop of 13,730 million bushels. Soybean yield was 49.5 bushels per acre with a crop of 4,216 million bushels. This report was based on actual harvest data and incorporated amended domestic use and export categories. The WASDE presumably considered the predicted impact on world prices following disruption of the 2022 Ukraine crop by the invasion from the Russian Federation.

COMMODITY PRICES

The following quotations for the months of delivery as indicated were posted by the CME at 14H00 on February 2nd 2023, compared with values at close of trading on January 26th 2023 (in parentheses): -

 

COMMODITY

Corn (cents per bushel)

March 675 (683).

May 674 (680).

Soybeans (cents per bushel)

March 1,534 (1,524).

May 1,527 (1,516).

Soybean meal ($ per ton)

March 491 (479).

May 475 (463).

 

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

Corn: March quotation down 8 cents per bushel. (-1.2 percent)

Soybeans: March quotation up 10 cents per bushel (+0.7 percent)

Soybean Meal: March quotation up $12 per ton (+2.5 percent)

 

The NASDAQ spot prices for feedstuffs per short ton at 16H00 on February 1st 2023 with prices for the previous week were:-

  • Corn (ZC): $243 ($244). 52-week range $177 to $292
  • Soybean Meal (ZM): $485 was $479. 52-week range $311 to $488

 

Values for other common ingredients per short ton:-

  • Meat and Bone Meal, (According to the USDA National AnimalBy-product Feedstuffs Report on January 27th): $375 to $480; porcine (MN) $400 to $450 ruminant. 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) $250 to $310 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 January 27th for MO. and other states: $200 to $260 per ton ($235 per ton in early June, with current price reflecting surge and subsequent fluctuation in wheat price following the invasion of Ukraine and from U.S. drought)
  • Bakery Meal, (MO & TX): $225 per ton (unchanged)
  • Rice Bran, (AR & TX): $200 to $270 per ton.

 

For each $1 per ton (2.8 cents/bushel) change in corn the cost of egg production would change by 0.11 cent per dozen

 

For each $10 per ton change in the price of soybean meal the cost of egg production would change by 0.35 cent per dozen

 

The respective changes in the spot price of corn and soybean meal on February 1st compared with January 26th would have raised nest-run production cost for eggs by 0.1 cents per dozen.

*(Rounded to 0.1cent)

 

COMMENTARY ON AVAILABILITY AND PRICES OF FEED COMMODITIES

The social restrictions imposed in the U.S. as a result of COVID-19, now being eased, were projected to reduce ethanol demand by 1.5 billion gallons or 10 percent of projected 2020-2022 requirement, accepting a nominal ten percent addition (E-10) to gasoline. This past week 90.6 percent (was 89.2 percent last week) of the U.S. ethanol fermentation volume was operational, based on the January 2022 U.S. Energy Information Administration (U.S. EIA) capacity data. The outlook for increased production will depend on higher domestic demand in addition to increasing the quantity that is exported. During October ethanol exports attained 104 million gallons (2.0 million barrels), down 16.4 percent from September with 53 percent to Canada. Brazil and China did not import from the U.S in October. U.S. imports in October, all from Brazil attained 16 million gallons (0.3 million barrels).

 

According to the U.S. EIA, for the week ending January 27th 2022 the industry produced on average 1,028,000 barrels of ethanol per day. This was up 1.6 percent from the week ending January 20th 2022 and above the one million gallon per day benchmark for the third consecutive week after three weeks below this level. On January 27th ethanol stock was down 2.7 percent from the previous week at 24.4 million barrels, representing an approximately 21-day reserve and confirming higher demand, given higher production and disproportionately lower stock. The U.S. Energy Information Administration forecast ethanol production at 970,000 barrels per day during the first quarter of 2023. The White House allowed all-year round 15 percent addition to gasoline resulting in an increase in the blend rate to 10.5 percent average during the past summer. The Renewable Fuels Association calculated that this represented an incremental sale of 190 million gallons of E-15. Given the unusually high price of gasoline relative to ethanol, U.S. drivers may have saved $50 million over summer despite the deterioration in fuel efficiency from dilution of gasoline. Given that many older vehicles cannot use higher than an E-10 blend and drivers are curtailing mileage due to high fuel costs combined with the reality of restraints imposed on fuel station storage and dispensing of high-ethanol blends, the short-term prospects for increased domestic consumption are unfavorable. 

 

Recent Energy Prices:-

  • Ethanol quoted on the CBOT (EH) on February 1st was priced at $2.16 per gallon unchanged over previous months due to lack of trading and compared to a 52-week range of $2.19 to $2.16 per gallon.
  • On February 1st RBOB gasoline traded on NASDAQ (RB) at $2.45 per gallon, down 17 cents (6.5 percent) from the previous week. The 52-week range for RBOB gasoline is $2.30 to $4.22.
  • The CME WTI crude price of $77.09 per barrel on February 1st was $4.23 per barrel (5.2 percent) lower than the previous week although with intra-week fluctuation reflecting the energy market. Hydrocarbon sources of energy are now contributing less to inflation.
  • The AAA national average gasoline price declined progressively over successive weeks but recently has trended higher and on February 1st was unchanged at $3.50 per gallon for unleaded regular grade. Gasoline is now $1.34 per gallon more expensive than ethanol with a 63 percent higher BTU rating. High gasoline prices are attributable to a reduction in refining capacity due to seasonal maintenance and weather disruptions along the Gulf.
  • The AAA national average diesel price was $4.68 per gallon on February 1st unchanged from the previous week but with prospects of continuing rise in price due to a low National stock.
  • CME Henry Hub natural gas was priced at $2.51 per MM BTU on February 1st, down $0.34 (11.9 percent) from the previous week and down $3.12 per MM BTU over five weeks due to warmer weather and transitory reduced exports..

 

With most plants among the 198 that were operational on January 1st 2022 with a combined capacity of 1,134 million barrels per day functioning at 90.6 percent, DDGS is freely available. The University of Missouri Extension Service By-Product Feed Price Listing priced DDGS at $250 to $310 per ton on February 1st, but will be priced higher reflecting the price of corn. Wide price variation exists depending on supplier, quantity and location. It is axiomatic that the cost of DDGS will reflect changes in the price of corn. Generally DDGS is currently incorporated at moderate inclusion levels in egg-production formulas based on price relative to the nutrient contribution of corn and other ingredients. This will change as corn and hence DDGS fluctuates in price

 

The CME soybean price for March 2023 delivery at 14H00 on February 2nd was 0.7 percent higher to 1,534 cents per bushel compared to the previous week at 1,524 for March delivery. The current price of soybeans is a reflection of availability for domestic consumption and export orders. Soybean meal was up 2.5 percent to $491 per ton for March 2023 delivery. Prices are obviously influenced by projections of yield in the three major producing nations in South America. The downstream freight cost on barges from Midwest Mississippi loading elevators through to export terminals has moderated as the rise in river level has allowed larger tows and quicker passage. This has made U.S. corn and soybeans more competitive compared to Brazil and Argentine.

 

According to a release on January 16th by the National Oilseed Processors Association, whose members process 95 percent of the U.S. crop, 177.5 million bushels of soybeans were crushed in December 2022. This value was down 1.0 percent from November, at 179.3 million bushels. The December 2022 crush was 10.4 percent lower than the December 2021 value of 198 million bushels.

 

On February 2nd the CME spot price for soybean oil was unchanged from the previous week at 60.92 cents per lb. Prices for vegetable oils have fluctuated over past weeks but with 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. Imposition of export restrictions on palm oil by Malaysia will impact prices. During 2022, it is anticipated that 41 percent of U.S. soy oil was diverted from fuel to biodiesel.

 

On February 1st, the soybean meal spot price quoted on NASDAQ was $485 per ton, $6 per ton higher than the spot price last week and compared to a 52-week range of $400 to $522 per ton.

 

On February 1st Meat and Bone meal was priced over a range of $375 to $450 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 February 1st the conversion of the CNY to the BRL was BRL 0.75 unchanged from last week. The conversion of the CNY to the US$ was CNY 6.66, 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 January 12th 2022 WASDE # 632 and the USDA quarterly Grain Stocks Report posted under the STATISTICS Tab.

 

There is currently restricted operation of the free-passage agreement allowing Ukraine to ship commodities from Black Sea ports. Ukraine apparently exported the 2021 crop in storage to make room for the anticipated 2022 harvests of corn and other commodities in progress. 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.






























































































































































































Top