Weekly Commodity and Energy Report: January 27^th 2023.

OVERVIEW

Over the past five restrained trading days corn and soybeans increased less than one percent in price, from the previous week. Corn was up 0.9 percent to 683 cents per bushel for March 2023 delivery, influenced by higher ethanol production and export demand. Soybeans were up 0.6 percent compared to the previous week to 1,524 cents per bushel for March 2023 delivery. Soybean meal was 1.7 percent higher to $479 per ton for March delivery. The market showed a brief reaction to the projections of crop size and lower ending stocks as documented in the January 12^th WASDE #632. Despite fluctuating economic sentiment, a contrived delay in shipping grains from Ukraine Black Sea ports has reduced available volume and increased price pressure on wheat and other grains. Commodity prices were influenced by a more moderate and stable Dollar Index of 102, possibly stimulating U.S. exports. Lower than seasonal orders and shipments of corn to China and other importers were recorded by USDA-FAS during December but exports moved upwards 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 intensified.  The Federal Reserve increased the benchmark interest rate by 0.5 percent but in the December 14^th post-release commentary, Fed. Chairman, Jerome Powell suggested continued increases for successive future rate settings by the FOMC to suppress inflation. Equity markets have fluctuated during the past four weeks with inter-day closing prices up on sequential trading days over four days followed by sharp declines over the past two sessions due to “Fed-fear” with subsequent recovery. On January 19^th seasonally adjusted jobless claims for December 2022 were down 15,000 to 190,000 with 3.5 percent unemployment. The December 2022 CPI was down 0.1 percent. 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 11^th-hour $1.7 trillion omnibus spending bill passed on December 22^nd. and enacted on December 29^th Evident difficulty in electing a Speaker of the House requiring 15 ballots over 4 days suggests future conflict over funding SNAP, raising the debt ceiling and agricultural legislation including the Farm Bill. (Ultimately, downward pressure).
• A reduction in the November seasonally adjusted urban CPI to 0.1 percent compared to 0.8 percent in September and 0.4 percent in October coupled with the December jobs report suggest that inflation may have 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. Agricultural commodities harvested from occupied Eastern regions are being illegally sold to Syria and Lebanon. (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. (Lower prices in the future subject to favorable reports on crop progress and actual harvests)
• The Dollar Index (DXY) that has ranged from 95 to 116 over 52 weeks has recently shown less volatility. The DXY was at 101 on June 2^nd peaking at 116 in late October but declining to 102 for the past three weeks. The dollar index influences timing and volume of export orders. (Fluctuation in corn and soybean prices, high value depresses U.S. sales)

Based on CME quotations at close of trading on January 26^th U.S. farmers will receive and conversely livestock producers and ethanol refiners in the Midwest will pay above $6.83 per bushel for corn delivered in March 2023, up  0.9 percent from the quotation last week. Crushers will pay $15.24 per bushel for soybeans plus transport and basis for March 2023 delivery, up 0.6 percent from the previous week. Soybean meal was 1.7 percent higher to $479 per ton for March 2023 delivery compared to the quotation last week. Prices continued their moderate inter-day fluctuation with both soybeans and corn moved to a downward trend from the previous week.

EXPORTS

The restored ‘legacy’ FAS Export Report released late on January 26^th for the week ending January 19^th reflecting market year 2022-2023, confirmed that outstanding export orders for corn amounted to 12.03 million metric tons (473.4 million bushels) with 12.0 million metric tons (472.8 million bushels) actually shipped. Net orders for the past week covering the 2022-2023 market year attained 0.91 million metric tons (35.8 million bushels) with 0.91 million metric tons (35.8 million bushels) shipped for the past working week. For the current market year outstanding sales of corn to date are 34.7 percent lower than for the corresponding week a year ago. For market year 2023-2024 outstanding sales this week amounted to 1.26 million metric tons (49.8 million bushels), with 15,500 metric tons (0.6 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 19^th reflecting market year 2022-2023, recorded outstanding export orders for soybeans amounting to 12.9 million metric tons (474.3 million bushels) with 33.6 million metric tons (1,235.5 million bushels) actually shipped. Net weekly soybean orders attained 1.15 million metric tons (42.1 million bushels) with 1.9 million metric tons (69.8 million bushels) shipped for the past week. For the current market year to date outstanding sales of soybeans are 41.7 percent lower than for the corresponding week a year ago. Sales recorded for market year 2023-2024 amounted to 0.53 million metric tons (19.3 million bushels) with sales of 0.13 million metric tons (4.8 million bushels) this past week.                                                                                                                             (Conversion 36.74 bushels per metric ton)

For the week ending January 19^th 2022 net orders of soybean meal and cake amounted to 303,900 metric tons for the market year 2022-2023. During the past week 285,800 metric tons of meal and cake combined was shipped, representing 7.9 percent of the total 3,597,100 metric tons shipped during the current marketing year. This quantity is 91.4 percent of the volume shipped during the corresponding weeks of the previous market year. For the next market year outstanding sales attained 48,300 million metric tons with 30,000 metric tons sold this past week.

Projected harvests and ending stocks were documented in the January 12^th WASDE #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 close of trading on January 26^th 2023, compared with values at close of trading on January 19^th 2022  (in parentheses): -

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

Corn:                  March quotation up 6 cents per bushel.          (+0.9 percent)

Soybeans:         March quotation up 9 cents per bushel           (+0.6 percent)

Soybean Meal: March quotation up $8 per ton                          (+1.7 percent)

The NASDAQ spot prices for feedstuffs per short ton at close of trading on January 26^th 2023 with prices for the previous week were:-

• Corn (ZC): $244 ($243).  52-week range $177 to $292
• Soybean Meal (ZM): $479 was $478. 52-week range $311 to $488

Values for other common ingredients per short ton:-

• Meat and Bone Meal, (According to the USDA National Animal By-product Feedstuffs Report on January 20^th): $375 to $420; porcine (MN) $400 to $425 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 $320 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 and Miscellaneous Feedstuffs Report on January 20^th for MO. and other states: $175 to $240 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): $210 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 January 26^th compared with January 19^th would have raised nest-run production cost for eggs by 0.2 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 89.2 percent (was 88.8 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 20^th 2022 the industry produced on average 1,012,000 barrels of ethanol per day. This was up 0.4 percent from the week ending January 13^th 2022 and above the one million gallon per day benchmark for the second consecutive week after three weeks below this level. On January 20^th ethanol stock was up 7.3 percent from the previous week at 25.1 million barrels, representing an approximately 21-day reserve and confirming lower demand, given slightly higher production and disproportionately higher 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 January 26^th was priced at $2.16 per gallon unchanged over previous months and compared to a 52-week range of $2.19 to $2.16 per gallon.
• Concurrently RBOB gasoline traded on NASDAQ (RB) at $2.62 per gallon, up 7 cents (2.8 percent) from the previous week. The 52-week range for RBOB gasoline is $2.30 to $4.22.
• The CME WTI crude price of $81.32 per barrel on January 26^th was $3.27 per barrel (4.0 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 with January 26^th up 22 cents per gallon (6.6 percent), on increased demand, to $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. 
• The AAA national average diesel price was $4.68 per gallon on January 26^th up 8 cents per gallon (1.7 percent) 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 $2.85 per MM BTU on January 26^th, down $0.79 (21.7 percent) from the previous week and down $2.78 per MM BTU over four weeks due to warmer weather, during seasonal  shutdown of plants using gas as feedstock and transitory reduced exports..

With most plants among the 198 that were operational on January 1^st 2022 with a combined capacity of 1,134 million barrels per day functioning at 89.2 percent, DDGS is freely available. The University of Missouri Extension Service By-Product Feed Price Listing priced DDGS at $250 to $320 per ton on January 24^th, 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 close of trading on January 26^th was 0.6 percent higher to 1,524 cents per bushel compared to the previous week at 1,515 for March delivery. The current price of soybeans is a reflection of availability for domestic consumption and export orders. Soybean meal was up 1.7 percent to $479 per ton for March 2023 delivery. Prices are obviously influenced by projections of yield in the three major producing nations in South America. The sharp increase in downstream freight cost on barges from Midwest Mississippi loading elevators through to export terminals during October and November 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 16^th 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 January 26^th the CME spot price for soybean oil was down $2.23 per lb. (3.5 percent) from the previous week to 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 January 26^th 2022, the soybean meal spot price quoted on NASDAQ was $479 per ton, $1 per ton higher than the spot price last week and compared to a 52-week range of $400 to $522 per ton.

On January 26^th 2022, Meat and Bone meal was priced over a range of $375 to $425 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 January 26^th the conversion of the CNY to the BRL was BRL 0.75 up CNY 0.01 from last week. The conversion of the CNY to the US$ was CNY 6.66, up 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 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 12^th 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.