Weekly Economy, Energy and Commodity Report: September 14^th 2023.

OVERVIEW

At 14H00 on September 14^th the CME price for corn was down 2.3 percent compared to the previous week to 460 cents per bushel for September delivery. Despite the small weekly change, price was subject to large inter-day fluctuation with a sharp decline on Tuesday September 12^th following release of the WASDE with updates on yield, acreage and ending stocks. Prices of commodities were influenced by weather conditions and profit taking and indirectly by events in the Black Sea. Other factors included movement in the wheat market, with the crop in Australia projected one third down due to El Nino. During the week ending August 29^th, 49 percent of corn acreage was located in drought areas compared to 45 percent a week ago. Orders by China resumed at the end of the 2022-2023 market year. Despite concern over weather as the crop matures, the demand for ethanol and a projection for lower ending stock of corn, prices are remaining substantially unchanged week-to-week.

Soybeans were down 1.0 percent from last week to 1,336 cents per bushel for September delivery. Prices during the week generally responded to events in Ukraine, predictions of crop size and ending stocks and some profit taking with a sharp decline on Tuesday September 12^th. During the week 43 percent of soybean acreage was located in drought areas up from 40 percent last week.

Soybean meal was down 1.5 percent to $401 per ton for September delivery, reflecting higher domestic and export demand. Price will fluctuate to reflect the CME price for soybeans and the demand for soy oil. The market has now accepted projections of crop size and higher stocks for the old crop as documented in the April WASDE Report and the forecast included in the September WASDE Report for the 2023 crop and following the August 25^th report on the Pro Farmer crop tour.

WTI was up 1.8 percent from last week rising $1.55 to $88.95 per barrel at 18H00 on September 13^th attributed to higher demand and strengthening of the U.S. Dollar. On September 14^th WTI rose briefly above $90 per barrel before retreating by mid-day. The May announcement of an ‘agreed’ production cut by OPEC and an intended 1 million barrels per day voluntary cut by Saudi Arabia announced on June 4^th and extending through December is now materially contributing to inflation.

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

• Fluctuating weather conditions in areas growing corn and soybeans with projected lower yields despite reduced speculation in commodities. (upward pressure).

• Geopolitical considerations moved markets this past week. Cancellation of the BSGI in July and ongoing attacks on Ukraine port facilities continue to impact prices of wheat, corn, oilseeds and vegetable oils. Exports from Ukraine will be severely restricted even with E.U. support. Russia is attempting to implement a Black Sea blockade on Ukraine that raises prospects for NATO intervention. (Upward pressure on corn and wheat and an indirect effect on soybeans)

• Macroeconomic U.S. factors:-
• Most economists in academia and the private sector are forecasting a “soft landing” of the economy following upgraded forecasts for Q3 GDP and economic parameters as detailed below. Inflation has declined from 9.1 percent month-over-month to 4.0 percent over 11 FOMC rate cuts without materially increasing unemployment. There is evident stability in the bank sectors in both the U.S. and Europe. Large U.S. banks passed stringent “stress tests” in June.
• The Federal Reserve increased the benchmark interest rate at the monthly FOMC meeting on July 26^th by an expected 25 basis points and is expected to pause in September. Chairman Powell in Congressional testimony and in FOMC minutes indicated that additional increases should be expected with observers anticipating one more rate hike in 2023 to restore inflation to near an annual 2.0 percent target that is now being questioned for validity.
• The Department of Commerce announced that the inflation rate for Q2 attained 2.6 percent down from the Q1 level of 4.1 percent.
• The August 30^th announcement of Q2 GDP confirmed a 2.1 percent annualized increase compared to a previous projection of 2.4 percent.
• The September 13^th release of the August 2023 CPI confirmed an annualized increase of 3.7 percent (3.2 percent July) with a core value of 4.3 percent. Food was up 0.2 percent from July and energy up 5.2 percent, mainly due to gasoline higher by 10.1 percent. The macro trend is clearly towards reduced inflation but with concern over escalation in energy prices.
• The August Producer Price Index (PPI) released on September 14^th rose 0.7 percent over July. The increase is attributed mainly to a rise in energy costs but with the core value excluding volatile fuel and food, was steady at 0.1 percent. Wholesale food was down 0.5 percent compared with a 0.4 percent increase in July.
• The September 14^th release of retail sales showed a monthly rise of 0.6 percent over August and 2.5 percent from August 2022. The Federal Reserve closely monitors this index as a measure of the trend in inflation.
• The Conference Board Consumer Confidence Index released on August 29^th for July/August, declined to 106 points, down from 114 in june/July
• New home sales in July were up 4.4 percent over June despite +7% mortgage rates.
• Non-farm payrolls increased to 187,000 during July, lower than the 12-month average of 240,000 as documented by the Bureau of Labor Statistics on July 31^st The unemployment rate fell to 3.5 percent from 3.6 percent in June. Average hourly wage rate in July was up 0.4 percent from June to $33.74 and up 4.4 percent year over year. Wage rates are closely followed by the Federal Reserve FOMC. Job openings declined to 8.8 million on July 31^st down 4.4 percent from 9.2 million on June 30^th
• Initial jobless claims released on September14^th attained 220,000 for the week ending September 9^th, up 7,000 over the week. The four-week moving average for jobless claims attained 224,000. The Bureau of Labor Statistics estimated 1.68 million continuing claims as of the second week in September.
• A Bureau of Labor Statistics report on September 7^th recorded a 3.5 percent increase in Productivity for Q2; Unit Labor Cost was up by 2.2 percent on a normalized basis and Hours Worked down by 1.5 percent in Q2
• The ADP reported on August 30^th that private payrolls increased by 177,000, down 52.2 percent from July compared with an estimate of 195,000. This decline will not directly influence the probability of short-term future rate hikes or pauses. The ADP is regarded by the FOMC as an unreliable statistic

FACTORS INFLUENCING COMMODITY PRICES

• Dry weather in the Midwest during early June transitioned to intermittent rain effectively lowering prices for corn and soybeans in July and early August. Drought conditions prevailed in 40 percent of corn areas and 43 percent of soybean acreage this past week. (Downward pressure on prices with firmer indications yields in the July WASDE)
• The Pro-Farmer crop tour recently lowered yield estimates for corn and soybeans from the revised September WASDE estimates by 1.0 and 0.8 percent respectively, based on adverse weather conditions.

• It is evident that both polarization in the closely divided chambers of Congress and intra-party conflict between and among both sides of the House will delay adoption of appropriations bills. Passage of the 2023 Farm Bill will be contentious and now most likely to be delayed until the end of the year over SNAP eligibility and other entitlements that collectively represent 75 percent of total expenditure. The August 2^nd downgrade of U.S. debt from AAA to AA+ by Fitch Ratings recognizes Congressional dysfunction. The Agency cited “a steady deterioration in the standard of governance”. The House must pass 11 appropriations bills in 12 working days from mid-September to avoid shutdowns at the end of the Federal fiscal year. This situation is creating uncertainty and will impact equity and commodity markets.

• The August 12^th WASDE #640 updated soybean production and a near record corn harvest for the new crop with high world availability despite drought in the Argentine. The September WASDE confirmed the damage caused by the transitory drought in the Midwest during late May through early July by reducing the projected yields of both soybeans and corn from the August report. The U.S. will export 12 percent of both old and new crop corn resulting in lower ending stocks. Soybean exports will comprise 44 percent of the old crop and 40 percent of the new crop with a reduction in ending stock. (See WASDE Report in this edition confirming availability, use and ex-farm price projections)

• There is an expectation that for market-year 2022-2023, Brazil will attain a record soybean harvest of 156 million metric tons with export of 97 million metric tons. These values were increased by 2 percent and 4 percent respectively from May projections. Corn exports will attain 50 million metric tons (197 million bushels). Soybean exports in August will be 8.7 million metric tons (320 million bushels) (Lower prices in the future subject to favorable reports on crop progress and actual harvests)

• The Dollar Index (DXY) was 104.7 on September 13^th, down 0.1 points from last week. The DXY has ranged from 99.6 to 110.8 over the past 52-weeks. The dollar index influences timing and volume of export orders and the price of WTI crude.

EXPORTS

The FAS Export Report, the second released for market year 2023/2024 available on September 14^th for the week ending September 7^th reflected carry-over from market year 2022-2023. The report confirmed that outstanding export orders for corn amounted to 10.4 million metric tons (410.7 million bushels). Net orders for the past week covering the 2023-2024 market year amounted to 0.75 million metric tons (28.7 million bushels). Shipments recorded during the past working week amounted to 0.73 million metric tons (28.7 million bushels ). For market year 2024-2025 outstanding sales this week amounted to 0.15 million metric tons (5.7 million bushels), with sales of 25,400 metric tons (1 million bushels) recorded this week for the 2024-2025 market year. There were no sales this past week for the 2024-2025 market year

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

The FAS Export Report for the week ending September 7^th reflecting market year 2023-2024 with carry-over from the previous market year, recorded outstanding export orders for soybeans amounting to 16.2 million metric tons (590.5 million bushels) with cumulative shipments recorded for the new market year attaining 0.4 million metric tons (14.0 million bushels). Net weekly orders attained 0.2 million metric tons (25.9 million bushels). There were neither new or outstanding sales recorded for market year 2024-2025 (Conversion 36.74 bushels per metric ton)

For the week ending September 7^th 2023 net orders of soybean meal and cake amounted to a negative 201,600 metric ton value because of cancellations for the market year 2022-2023. During the past week 119,700 metric tons of meal and cake combined was shipped, representing 1.0 percent of the total 11.7 million metric tons exported during the current marketing year. This quantity to date is 2.9 percent higher than the volume for the corresponding period of the previous market year. For the next market year 2023-2024 outstanding sales have attained 2.9 million metric tons with 454,700 metric tons ordered this past week.

The September 12^th 2023 WASDE confirmed:-

• Corn area planted for all purposes in 2023 (‘new crop’) will attain 94.9 million acres, up 6.4 percent or 5.6 million acres from last year. Compared with the 2022 season, planted acreage is expected to be up or unchanged in 43 of the 48 estimating States. According to the September WASDE, yield was lowered to 173.8 bushels per acre with a resulting 2,221 million bushel ending stock. The USDA held the average season ex-farm price at 490 cents per bushel.
• Soybean area planted for 2023 is estimated at 83.6 million acres, down 5.1 percent from 88.1 million acres last year. Compared with last year, planted acreage is down or unchanged in 21 of the 29 estimating States. According to the September WASDE yield was reduced to 50.1 bushels per acre with a resulting 220 million bushels ending stock with the USDA projecting a higher average season price of 1,290 cents per bushel.
• The August 25^th release of the 2023 report of the Pro Farmer crop tour projected corn yield down 1.0 percent to 172 bushels per acre, compared to 173.8 bushels per acre included in the September USDA WASDE. Soybean yield was reduced by 0.8 percent to 49.7 bushels per acre from 50.1 bushels per acre due to recent dry and hot weather
• Crushers are expected to produce 53.98 million tons of soybean meal. Ending stocks will attain 400,000 tons increasing the USDA projected price from the previous season by $15 to $380 per ton.

The preference for corn planted was based on a favorable projection of the corn to soy benefit ratio in March 2023.

Actual 2022 corn and soybean harvests and projected ending stocks for the 2022 season (‘old crop’) were documented in the April 11^thWASDE #635, posted under the STATISTICS Tab. Corn yield attained 173.3 bushels per acre with a crop of 13,730 million bushels. Ending stock will attain 1,342 million bushels. Soybean yield was 49.5 bushels per acre with a crop of 4,276 million bushels. Ending stocks were projected to be 210 million bushels. The April WASDE report was based on actual harvest data and values incorporated amended domestic use and export categories. This WASDE report presumably considered the predicted impact on world prices following disruption of the 2022 Ukraine crop following the invasion of Ukraine by the Russian Federation. Updated values are included in the summary of the September WASDE #640 posted in this edition. WASDE #641 will be reviewed in the October 20^th edition of EGG-NEWS

COMMODITY PRICES

The following quotations for the months of delivery as indicated were posted by the CME at 14H00 on September 14^th 2023, compared with values at 15H00 on September 7^th 2023 (in parentheses): -

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

Corn: Sept. quotation down 11 cent per bushel. (-2.3 percent)

Soybeans: Sept. quotation down 14 cents per bushel (-1.0 percent)

Soybean Meal: Sept. quotation down $6 per ton (-1.5 percent)

The CME spot prices for feedstuffs per short ton at close of trading on September 13^th 2023 with prices for the previous week were:-

• Corn (ZC): $171 per ton. Down $2 per ton (-1.1 percent) from the previous week. 52-week range $166 to $254
• Soybean Meal (ZM): $391 per ton was $398 Down $7 per ton (-1.8 percent) from the previous week. 52-week range $386 to $513

Values for other common ingredients per short ton:-

• Meat and Bone Meal, (According to the USDA National AnimalBy-product Feedstuffs Report on September 8^th): $425 to $480 per ton (Av. $455 per ton) for porcine (ex MN); $400 to $480 per ton (Av. $450 per ton) for ruminant (ex MN). Price varies according to plant and location
• According to the USDA National Mill-Feeds andMiscellaneous Feedstuffs Report on September 8^th wheat middlings from St. Louis, MO. and other states: $140 to $180 per ton (Av. $160 per ton) (Current value reflect wheat price following the disruption of shipping from Ukraine, drought in the U.S and world weather extremes)
• According to the University of Missouri Extension Service By-Product Feed Price Listing on September12^th DDGS, (IA. and other states) was priced at $195 to $260 (Av. $230 per ton). Price varies according to plant and location and is expected to fluctuate with the price of corn
• Bakery Meal, (MO & TX): $190 to $220 per ton early September.
• Rice Bran, (AR & TX): $150 to $200 per ton. (Av. $175) early September.

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

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

The respective changes in the spot prices of corn and soybean meal on September 13^th compared with September 5^th would decrease nest-run production cost for eggs by 0.4* cents per dozen. *(Rounded to 0.1cent)

COMMENTARY ON AVAILABILITY AND PRICES OF FEED COMMODITIES

The latest U.S. Energy Information Administration (U.S. EIA) report estimated that fuel ethanol blending would average 990,000 barrels per day in 2023, up 1.2 percent from 2022. This past week 90.1 percent (87.8 percent last 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 summer driving in addition to increasing the quantity that is exported.

During June 2023 (the last month for which data is available) ethanol exports were down 0.8 percent from May to 115 million gallons (2.68 million barrels). Importing nations and regions of significance and their proportions of total volume for the month included:- 45.3 percent to Canada; 22.4 percent to Central and South America and the Caribbean; 15.4 percent to Europe.; 9.1 percent to South Korea; 3.7 percent to Mexico; 3.0 percent to Africa.

According to the U.S. EIA, for the week ending September 8^th 2023 the industry produced on average 1,039,000 barrels of ethanol per day. This was up 2.7 percent from the week ending September 1^st 2023 and continued weekly production above the one million gallon per day benchmark. On September 8^th ethanol stock was down 2.1 percent from the previous week to 21.2 million barrels, an approximately 20-day reserve. This past week demonstrated higher demand for ethanol, given relative changes in the weekly production level and stock. The U.S. Energy Information Administration forecast ethanol production at 970,000 barrels per day during the first and second quarters of 2023 although in reality this projected volume was regularly exceeded. The short-term prospects for a substantial increase in domestic consumption are unfavorable despite a 2023 summer waiver and bipartisan bills in Congress to permit year-round E-15 blend. Many older vehicles cannot use higher than an E-10 blend and there are obvious restraints on fuel stations to store and dispense high-ethanol blends although the USDA is extending grants for investment in tanks and multi-blend pumps,

Current Energy Prices:-

• Ethanol quoted on the CME (EH) on September 13^th 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 September 13^th RBOB gasoline traded on NASDAQ (RB) at $2.66 per gallon, up six cents (2.3 percent) from the previous week. The 52-week range for RBOB gasoline is $2.01 to $4.73.
• The CME WTI crude price has largely ignored concerns over a possible World recession. There has been little response to a predicted lower supply due to a previously announced OPEC production cut that commenced in July and a voluntary one-million barrel per day reduction by Saudi Arabia revealed on June 4^th extending to December. Price was up $1.55 per barrel, (1.8 percent) to $88.95 per barrel on September 13^th compared to the previous week. WTI touched $90 per barrel on September 14^th before retreating at midday. Hydrocarbon sources of energy are now contributing materially to inflation compared to the second quarter of 2023.
• The AAA national average regular grade gasoline price was $3.85 per gallon on September 13^th, up five cents per gallon (1.3 percent) from last week. Gasoline is now $1.69 per gallon more expensive than ethanol but has a 63 percent higher BTU rating. Future rises in fuel cost are inevitable given the increases in benchmark WTI
• The AAA national average diesel price was $4.51 per gallon on September 13^th, up six cents per gallon (1.3 percent) from the previous week but with prospects for a future increases due to a low national stock and a rising WTI price.
• CME Henry Hub natural gas was priced at $2.74 per MM BTU on September 13^th up 23 cents per MM BTU (9.2 percent) from the previous week

INGREDIENTS

DDGS is freely available with most plants among the 192 operational on January 1^st 2023 (the last available estimate) with a combined capacity of 1,152 million barrels per day functioning at 90.1 percent. The University of Missouri Extension Service By-product Feed Price Listing on September 12^th priced DDGS at $195 to $260 per ton, with an average of $230 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 September 2023 delivery at 14H00 on September 14^th was down 1.0 percent to 1,336 cents per bushel. The current price of soybeans is a reflection of availability for domestic crushing, consumption and export orders. Soybean meal was down 1.5 percent on the CME to $401 per ton for September 2023 delivery. Prices are obviously influenced by projections of harvest in the three major producing nations in South America, drought in the U.S. Midwest coupled with domestic and international demand for soy oil and meal.

According to a release on August 15^th by the National Oilseed Processors Association, whose members process 95 percent of the U.S. crop, 173.3 million bushels of soybeans were crushed in July 2023, higher than the consensus of estimates averaging 171.3 million bushels. Crush volume was up 5.0 percent from the previous month of June 2023, at 165.0 million bushels. The August crush data will be posted in the September 22^nd edition.

On September 13^th the CME spot price for soybean oil was down 0.6 cents per lb. (1.0 percent) from the previous week to 61.7 cents per lb. Prices for vegetable oils have fluctuated over past weeks but with supplies lower than demand especially for Asian crude palm oil prices will rise. There is a growing market acceptance that total oilseed supply will eventually be limited by a sharply diminished supply of sunflower oil from Ukraine, the World’s largest exporter of this commodity. Ukraine is subject to restraints on cultivation and limits on crushing and exports due to hostilities following the invasion by the Russian Federation. It is anticipated that 41 percent of U.S. soy oil was diverted from fuel to biodiesel during 2022.

On September 13^th the soybean meal spot price quoted on NASDAQ was $391 per ton, $7 per ton lower than the spot price last week and compared to a 52-week range of $389 to $439 per ton.

On September 13^th Meat and Bone meal (porcine) was priced over a range of $400 to $480 per ton (Av. $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 September 13^th the conversion of the CNY to the BRL was BRL 0.68 unchanged from last week. The conversion of the CNY to the US$ was CNY 7.14 up CNY0.19 from the previous week as the Yuan strengthened.

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)

During calendar 2022, 58.0 million metric tons (2,243 million bushels) of corn were exported by the U.S., valued at $18,609 million. The top five importers with their respective values expressed as a percentage were: China, 28.2; Mexico, 26.4; Japan, 16.0; Canada, 7.2 and Colombia, 5.3.

During calendar 2022, 57.2 million metric tons (2,099 million bushels) of soybeans were exported by the U.S., valued at $34,392 million. The top five importers with their respective values expressed as a percentage were: China, 72.6; Mexico, 14.8; E.U., 11.3; Egypt, 6.1 and Japan, 7.3.

COMMENT

Subscribers are referred to the September 12^th 2023 WASDE #640, in this edition and the USDA Planted Acreage Report and the quarterly Grain Stocks Report posted under the STATISTICS Tab.

Following cancellation of the Black Sea Grain Initiative (BSGI) there will be limited shipment of commodities from the three main Black Sea and Danube Delta ports that remain functional. 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. The Economist estimates that 10 million metric tons of agricultural commodities from the 2022/2023 harvest of 53 million metric tons are still in storage. Shipments through Black Sea ports in 2033 have attained 2.9 million metric tons through July

Either naval intervention by NATO, a negotiated peace treaty or concessions to the Russian Federation will be required to restore free passage.