WEEKLY ECONOMY, ENERGY AND COMMODITY REPORT: November 16^th 2023.

OVERVIEW

At 15H00 on November 16^th the CME price for corn was up 1.3 percent compared to the previous week to 474 cents per bushel for December delivery. Prices of commodities were influenced by profit taking, and an appreciation of the size of the 2023 crop. Export orders for the current year have increased sharply and prices are indirectly influenced by events in the Black Sea. Orders by China resumed at the end of the 2022-2023 market year and extended into November. The demand for ethanol persists. Prices are trending higher week-to-week despite a projection for a higher ending stock of corn.

Soybeans were up 2.3 percent from last week to 1,360 cents per bushel for January 2024 delivery. Prices during the week generally responded to predictions of crop size, export orders and ending stocks with some profit taking.

Soybean meal was up 4.0 percent to $467 per ton for December delivery. Price was influenced by demand despite record high crushings in October. Price will fluctuate to reflect the CME price for soybeans and the demand for soy oil that is rising. The market responded to increased crop size and higher stocks included in the November WASDE Report for the 2023 crop.

 WTI was relatively stable from last week to $75.91 on November 15^th, attributed to constant demand and higher U.S. reserves despite the added effect of conflict in the Middle East. There was moderate fluctuation in price during the week ($75.33 to $78.26). Crude oil inventory other than the Strategic Reserve, was at 25.3 million barrels, last week, seasonally down.

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 under the influence of a strong El Nino event. The 2023 U.S. harvest is almost complete and ahead of 2022 (downward pressure).

• Geopolitical considerations continue to move markets. Cancellation of the BSGI in July and ongoing attacks on Ukraine port facilities impact prices of wheat, corn, oilseeds and vegetable oils. Exports from Ukraine will be severely restricted even with E.U. support. Russia has unsuccessfully attempted to implement a Black Sea blockade on Ukraine that raises prospects for further asymmetric responses by Ukraine and even possible NATO intervention. Loaded bulk vessels are sailing from Chornomorsk,  Odesa and also from Danube River ports using the ‘Humanitarian Corridor” to various destinations. The costal route is operational despite threats by the Russian Federation to mine the entrance to ports and deploy airborne missiles. (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 confident of a “soft landing” for the economy following the release of Q3 GDP and recent economic parameters despite high bond rates. Inflation as measured by CPI declined from 8.9 percent in June 2022 to 3.2 percent in September as a result of 11 FOMC rate cuts that have not precipitated employment. 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 held the benchmark interest rate steady at the monthly FOMC meeting on November 1^st.  The Federal Reserve commentary indicated that the rate would be held high for a prolonged period in the range of 5.25 to 5.50 percent.  Chairman Powell in Congressional testimony and documented in FOMC minutes has indicated that additional increases should be expected with observers anticipating one more rate hike in early 2024 to restore inflation to near an annual 2.0 percent target that is now being questioned for validity.  A rise in December now appears unlikely given lower October CPI and PPI data.
• 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 October 26^th announcement of Q3 GDP confirmed a 4.9 percent annualized increase, above the estimate of 4.7 percent mainly due to consumer spending. In Q2 GDP growth attained 2.1 percent.
• The November 14^th release of the October CPI confirmed a zero increase from September. The annual increase of 3.2 percent was the lowest rate since March 2021. The increase in the core value (minus food and energy) was 0.2 percent, in line with estimates.  Food at home was up 0.3 percent from the previous month. Food away from home was up 0.4 percent from September 2022. Energy was down 2.5 percent, mainly due to gasoline and diesel fuels. The shelter category was up 0.5 percent. The macro trend is clearly towards reduced inflation due to a fall in energy prices. The CPI influences FOMC rate decisions
• The October Producer Price Index for Final Demand (PPI) released on November 15^th fell 0.5 percent over September that registered a 0.5 percent increase. The projection for October was for a 0.1 increase. The fall was attributed mainly to a 15.3 percent lower price of gasoline.  The core PPI value excluding volatile fuel and food, was down 0.1 percent and down 2.9 percent from September 2022. Wholesale food was down 0.2 percent compared to a 0.7 percent increase in September.
• A Federal Reserve release on October 15^th confirmed that industrial production increased 0.3 percent in September and was up 2.5 percent over the third quarter. Capacity utilization increased 0.2 percent to 79.7 corresponding to the 1972-2020 average.
• According to the November 2^nd release by the U.S. Census Bureau the Manufacturers’, Shipments, Inventories and Orders Survey, determined that new orders in September increased by 2.8 percent, following a rise of 1.0 percent in August.
• The November 15^th release of retail sales data showed a monthly fall of 0.1 percent in October. This value was below the revised September value of 0.9 percent. The Federal Reserve closely monitors this index as a measure of the trend in inflation. 
• The ISM® Services Index for October declined to 51.8 from a September value of 53.6. The October Prices Index was 45.1, higher than in September at 43.8 driven by lower labor and energy costs.
• The Conference Board Consumer Confidence Index released on October 31^st for September/ October, declined to 102.6 points, down from a revised 104.3 for the preceding four-week period.
• The University of Michigan Index of Consumer Sentiment released on November 13^th fell from 63.8 in September/ October to 60.4 for October/ November. Both the Current Economic Index (70.6 down to 65.7) and the Index of Consumer Expectations (59.3 down to 56.7) denote a decline in consumer sentiment extending to the fourth consecutive month influenced by high interest rates and geopolitical concerns.
• Non-farm payrolls increased by 15,000 during October, as documented by the Bureau of Labor Statistics on November 15^th. This was substantially lower than the average monthly gain of 258,000 over the previous 12 months.. The average hourly wage rate in October was up 0.2 percent from September at $34 per hour. Wage rates are closely followed by the Federal Reserve, FOMC.
• The October Bureau of Labor Statistics report on November 1^st   estimated 9.6 million job openings in October.
• Initial jobless claims released on November 16^th attained 231,000 for the week ending November 11^th, up 13,000 from the revised value for the previous week and higher than an estimate of 222,000. The four-week moving average amounted to 220,250. The Bureau of Labor Statistics estimated 1.87 million continuing claims during the second week of November. There is however evidence from October data that the labor market is cooling.
• The November Bureau of Labor Statistics report recorded a 4.7 percent increase in Productivity for Q3; Unit Labor Cost was down by 0.8 percent on a normalized basis and Hours Worked was up by 1.1 percent in Q3
• The ADP® reported on November 1^st that private payrolls increased by 113,000 in October, up from 89,000 in September and compared with an estimate of 130,000. The increase in employment was mostly in the health and education sectors. The increase will not directly influence the probability of short-term future changes in interest rate since the ADP® is regarded by the FOMC as an unreliable statistic

FACTORS INFLUENCING COMMODITY PRICES

•  Recent rainfall coincident with harvest reduced areas subject to drought. (Downward pressure on prices with firm indications of yields in the November WASDE)
• 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 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 2^nd downgrade of U.S. debt from AAA to AA+ by Fitch Ratings recognizes Congressional dysfunction. On November 10^th Moody’s downgraded U.S. credibility from ‘stable’ to ‘negative’ based on an inability to pass required fiscal legislation. The House failed to pass eleven appropriations bills and passed an 11^th hour continuing resolution deferring action to November 17^th to finance the Federal government.. Again failure to enact appropriations bills resulted in a second continuing resolution on November 15^th freezing spending at FY 2013 levels pending votes on appropriations with extended deadlines of January 19^th and February 2^nd 2014. A Federal shutdown would impact equity and commodity markets and the image of the U.S. governmental system.

• The November 9^th WASDE #642 updated soybean production and predicted a record corn harvest for the new crop. There will be ample world availability of ingredients although inequitable distribution will result in shortages in some nations. Soybean exports will comprise 40 percent of the new crop with a rise 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 2023-2024, Brazil will achieve a record soybean harvest of 162 million metric tons (5,951 million bushels) with exports of 100 million metric tons (3,674 million bushels) and will crush 56 million metric tons (2,057 million bushels). A corn harvest of 130 million metric tons (5,117 million bushels) is anticipated with export of 54 million metric tons (2,125 million bushels). (Lower prices in the future subject to favorable reports on crop progress and actual harvests)

• The Dollar Index (DXY) was 104.5 on November 15^th, down 1.0 points from last week and a two-month low. The DXY has ranged from 99.6 to 111.3 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, released on November 16^th for the week ending November 9^th reflected carry-over of corn from market year 2022-2023. The report confirmed that outstanding export orders for corn amounted to 14.60 million metric tons (574.7 million bushels). Net orders for the past week for the 2023-2024 market year amounted to a substantial 1.81 million metric tons (71.1 million bushels). Shipments recorded during the past working week amounted to 0.68 million metric tons (26.9 million bushels). For the current market year to date cumulative export of 6.5 million metric tons (255.7 million bushels) is 30.8 percent higher compared to the equivalent week of the previous market year. For market year 2024-2025 outstanding orders attained 1.04 million metric tons (40.9 million bushels) with no sales this past week

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

The FAS Export Report for the week ending November 9^th reflecting market year 2023-2024 with carry-over from the previous market year, recorded outstanding export orders for soybeans amounting to 14.18 million metric tons (520.8 million bushels). Net orders this past week attained an outstanding level 3.92 million metric tons (144.0 million bushels).  Shipments for the past working week attained a noteworthy 2.00 million metric tons (73.1 million bushels). For the current market year to date cumulative exports of 14.0 million metric tons (513.7 million bushels) are 3.2 percent lower compared to the equivalent week of the previous market year, but over an eight-week timespan. There were no outstanding or new sales this past week for market year 2024-2025

 (Conversion 36.74 bushels per metric ton)

For the week ending November 9^th 2023 outstanding orders for soybean meal and cake with carry-over attained 4.69 million metric tons. Net orders this week for soybean meal and cake amounted to 144,800 metric tons. During the past week 264,200 metric tons of meal and cake combined was shipped, representing the sixth week of the new market year. The quantity shipped to date is 21.9 percent higher than the volume for the corresponding first six weeks of the previous market year. For the next market year outstanding sales have attained 4,700 metric tons with no orders this past week.

The November 9^th 2023 WASDE confirmed:-

• Corn area planted for all purposes in 2023 (‘new crop’) attained 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 November WASDE, yield was raised to 174.9 bushels per acre with a resulting 2,156 million bushel ending stock. The USDA lowered the average season ex-farm price to 485 cents per bushel.
• Soybean area planted for 2023 attained 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 November WASDE yield was raised 0.6 percent to 49.9 bushels per acre with a resulting 245 million bushels ending stock. The USDA retained an average season price of 1,290 cents per bushel.
• Crushers are expected to produce 54.15 million tons of soybean meal. Ending stocks will attain 400,000 tons. The USDA retained a price of  price of $380 per ton.

The preference for planting corn over soybeans was based on a favorable projection of the corn to soy benefit ratio during March 2023.

COMMODITY PRICES

The following quotations for the months of delivery as indicated were posted by the CME at 15H00 on November 16^th 2023, compared with values at 15H00 on November 9^th 2023  (in parentheses): -

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

Corn:                   Dec. quotation up 6 cents per bushel.             (+1.3 percent)

Soybeans:          Jan. quotation up 31 cents per bushel             (+2.3 percent)

Soybean Meal:  Dec. quotation up $18 per ton                           (+4.0 percent)

The CME spot prices for feedstuffs per short ton at close of trading on November 15^th 2023 with prices for the previous week were:-

• Corn (ZC): $168 per ton. Down $1 per ton from the previous week (-0.6 percent). 52-week range $166 to $246
• Soybean Meal (ZM): $468 per ton was $449. Up $19 per ton (+4.9 percent) from the previous week. 52-week range $370 to $4.96

Values for other common ingredients per short ton:-

• Meat and Bone Meal, (According to the USDA National Animal By-product Feedstuffs Report on November 9^th): $415 to $470 per ton (Av. $440 per ton) for porcine (ex MN);  $400 to $480 per ton (Av. $435 per ton) for ruminant (ex MN). Price varies according to plant and location  
• According to the USDA National Mill-Feeds and Miscellaneous Feedstuffs Report on November 9^th wheat middlings from St. Louis, MO.  and other states: $145 to $160 per ton (Av. $155 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 November 14^th DDGS, (IA. and other states) was priced at $195 to $260 (Av. $220 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.
• Rice Bran, (AR & TX): $150 to $200 per ton. (Av. $175).

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 November 15^th compared with November 8^th would increase nest-run production cost for eggs by 0.6* cent per dozen.                                                                                                                       *(Rounded to 0.1cent)

ENERGY

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. For the week ending November 10^th, 91.9 percent (90.9 percent 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 summer driving in addition to increasing the quantity that is exported.

During August 2023  (the last month for which US Energy Information Administration data is available) ethanol exports were down 8.3 percent from July to 102 million gallons (2.442 million barrels). Importing nations and regions of significance and their proportions of total volume (rounded) for the month included:- 61 percent to Canada; 16 percent to Central and South America and the Caribbean;13 percent to Europe; 2 percent to Asia;    2 percent to Mexico;.

According to the U.S. EIA, for the week ending November 10^th 2023 the industry produced on average 1,047,000 barrels of ethanol per day, up 0.5 percent from the week ending November 3^rd 2023 and remaining above the one million gallon per day benchmark. On November 10^th ethanol stock was down 0.2 percent from the previous week to 21.0 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.

Current Energy Prices:-

• Ethanol quoted on the CME (EH) on November 15^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 November 15^th RBOB gasoline traded on NASDAQ (RB) at $2.18 per gallon, up five cents (2.5 percent) from the previous week reflecting the current low WTI price that is now evident on the CME and at the pump. The 52-week range for RBOB gasoline is $2.15 to $2.96.
• Despite announced production cuts in the face of increased demand for fuel, together with turbulence in the Middle East, the WTI crude price was relatively stable this week. An OPEC production cut that commenced in July in addition to a voluntary one-million barrel per day reduction by Saudi Arabia announced on June 4^th will extend to December. Price was up $0.58 per barrel, (0.8 percent) to $75.91 per barrel on November 15^th compared to the previous week. The ending stock of crude at Cushing OK. On November 10^th was up 8.5 percent to 25.6 million barrels, close to a seasonal nine-year low and 38.3 percent down from June 2^nd 2023. Hydrocarbon sources of energy contributed materially to inflation in the third quarter compared to the previous quarter of 2023 and will add to the burden in the fourth quarter.
• The AAA national average regular grade gasoline price was $3.35 per gallon on November 15^th, down 6 cents per gallon (1.8 percent) from last week. Gasoline is now $1.19 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 $4.34 per gallon on November 15^th, down 5 cents per gallon (1.1 percent) from the previous week but with prospects for future increases due to an extremely low national stock despite a falling WTI price.
• CME Henry Hub natural gas was priced at $3.15 per MM BTU on November 15^th  up 3 cents (1.0 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 91.5 percent. The University of Missouri Extension Service By-product Feed Price Listing on November 14^th priced DDGS at $195 to $260 per ton, with an average of $220 per ton from MO. Poet plants) and unchanged for many weeks. 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 January 2024 delivery at 15H00 on November 16^th was up 2.3 percent to 1,360 cents per bushel. The current price of soybeans is a reflection of availability for domestic crushing, consumption and export orders. Soybean meal was up 4.0 percent on the CME to $467 per ton for December 2023 delivery. Prices of soybeans are obviously influenced by projections of harvest in the three major producing nations in South America, the size of the drought-impacted harvest in the U.S. coupled with domestic and international demand for soy oil and meal.

According to a release on November 15^th by the National Oilseed Processors Association, whose members process 95 percent of the U.S. crop, a record crush for October attained 189.8 million bushels of soybeans. This was higher than the consensus of estimates averaging 187.2 million bushels. Crush volume was up 14.7 percent from the previous month of September 2023, at 165.5 million bushels and 2.9 percent above September 2022 at 184.5 million bushels. The November crush data will be posted in the December 22^nd edition of EGG-NEWS.

On November 15^th the CME spot price for soybean oil was up 2.6 cents per lb. (5.2 percent) from the previous week to 52.8 cents per lb. Prices for vegetable oils have fluctuated over past weeks but with recent increases in demand in relation to availability. Asian crude palm oil was higher this past week. It is anticipated that 41 percent of U.S. soy oil was diverted from fuel to biodiesel during 2022.

On November 15^th the soybean meal spot price quoted on NASDAQ was $468 per ton, $19 per ton higher than the spot price last week and compared to a 52-week range of $370 to $496 per ton.

On November 15^th Meat and Bone meal (porcine) was priced over a range of $415 to $470 per ton (Av. $440 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 November 15^th the conversion of the CNY to the BRL was BRL 0.68 down CNY 0.01 from last week. The conversion of the CNY to the US$ was CNY 7.26 down CNY 0.12 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 21.5 million metric tons (844 million bushels) compared to the previous market year with cumulative exports of 38.3 million metric tons (1,507 million bushels) 

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 2022, 58.0 million metric tons (2,243 million bushels) of corn were exported from 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 from 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 November 9^th 2023 WASDE #642, 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) Ukraine commenced 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.

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. Limited passage through the costal-route (“Humanitarian Corridor”) has allowed sea-transport of commodities since early August to supply Asia and Africa. This route was temporarily suspended on October 25^th but resumed operations shortly thereafter.