Weekly Commodity and Energy Report: May 11^th 2023

 OVERVIEW

At 14H00 on May 11^th CME corn was down 2.1 percent compared to the previous week to 632 cents per bushel despite higher wheat prices resulting from uncertainty over the Black Sea Grain Initiative. Price was also influenced by lower ethanol production and demand, and with an overhang from cancellation of orders from China during the previous week. Soybeans were down 0.8 percent from last week to 1,442 cents per bushel for May delivery. Soybean meal was down 1.9 percent to $420 per ton for May delivery but price will fluctuate to reflect the price of soybeans and demand for soy oil. The market has now accepted projections of crop size and higher stocks from the old crop as documented in the April 11^th WASDE Report but is anticipating more precise planting and emergence data in the May report. Commodity exports that fluctuated this past week were unaffected by a fractional rise in the Dollar Index to 102.0.

WTI was 3.0 percent higher at $71.11 per barrel at 14H00 on May 11^th despite the April announcement of an intended production cut by OPEC.

Factors influencing commodity prices in either direction over the past four

 weeks included:-

• A mild U.S. recession in 2023 appears more likely following turbulence in the bank sector in both the U.S. and Europe. The Federal Reserve increased the benchmark interest rate for the 10^th successive monthly FOMC meeting on May 3^rd by 25 basis points despite data indicating a gradual decline in inflation. This action was taken against evidence that progressively higher rates are stressing banks. Two failures occurred mid-March, albeit in mismanaged institutions but five large regional banks have experienced deterioration in their assets and equity. On March 30^th the Bureau of Economic Analysis issued a revised Real GDP of 2.6 percent for the fourth quarter of 2022. This value is based on increased consumer spending offset by lower investment in housing and a 0.6 percent increase in personal income. The April 2023 CPI (up 4.9 percent) and revised March WPI (down to 2.7 percent) were lower than forecast. On March 11^th initial jobless claims were 264,000 due to layoffs and were higher than expected. Nonfarm payrolls increased to 253,000 during April as documented by the Bureau of Labor Statistics on May 5^th with an unemployment rate of 3.4 percent. The April Producer Price Index was up 2.3 percent year-over-year and 0.2 percent down from March. These values were lower than expected suggesting a cooling in the U.S. economy. This is confirmed by the anemic first quarter GNP increase of 1.1 percent, lower than the 2.0 percent expected and the 2.6 percent growth posted for the fourth quarter of 2022.  (Transitory downward pressure on markets)

• It is evident that polarization in the closely divided chambers of Congress will result in conflict over spending. Passage of agricultural legislation including the 2023 Farm Bill will be contentious as SNAP eligibility and other entitlements represent 75 percent of the total. A 12^th-hour compromise is expected on raising the debt ceiling given the White House negotiations this past week ahead of a June 1^st potential default. (Ultimately, downward pressure if debt ceiling is not resolved).

• A cold snap in early May resulted in frost extending from the Northern Plains to the Texas Panhandle. Wheat and soybeans will be impacted but recently planted corn will be less affected. Rains have relieved drought on the southern plains. (Variable pressure on prices with firmer indications in the May WASDE)

• Geopolitical tensions that impact wheat, corn, oilseeds and vegetable oil exports from Ukraine persist. Extension of the Black Sea Grain Initiative for an additional 60 days was reluctantly accepted by the Russian Federation on March 18^th against undisclosed concessions on sanctions. Implementation is currently obstructed by actions of the Russian Federation with threats of non-extension, roiling markets. (Upward pressure on corn and wheat and an indirect effect on soybeans if Black Sea shipping is interrupted and if the BSGI is not renewed on May 18^th.)

• The April 11^th WASDE documented unchanged soybean and grain production compared to March with reduced world availability from Argentine due to drought. The U.S. will export 12 percent of old crop corn resulting in a stable ending stock. Soybean exports will comprise 44 percent of the old crop with no change in ending stock and a stable predicted price from March. (Lower domestic prices)

• There is an expectation that Brazil will attain a record soybean harvest of 153 million metric tons with export of 93 million metric tons. Corn harvests from Brazil for the 2022-2023 season will be higher than the previous season although recent dry weather will reduce yields. Corn exports will attain 50 million metric tons (Lower prices in the future subject to favorable reports on crop progress and actual harvests)

• The Dollar Index (DXY) has ranged from 99 to 116 over 52 weeks but has recently shown less volatility with a recent downward trend. The DXY was 102.0 on May 11^th. The dollar index influences timing and volume of export orders. (Fluctuation in corn and soybean prices, high value depresses U.S. sales)

EXPORTS

The FAS Export Report released on May11^th for the week ending May 4^th reflecting market year 2022-2023, confirmed that outstanding export orders for corn amounted to 11.9 million metric tons (467.5 million bushels) with 26.5 million metric tons (1,043 million bushels) actually shipped. Net orders for the past week covering the 2022-2023 market year attained 0.3 million metric tons (10.4 million bushels) with 1.1 million metric tons (45.1 million bushels) shipped during the past working week. For the current market year outstanding sales of corn to date are 36.2 percent lower than for the corresponding week a year ago. For market year 2023-2024 outstanding sales this week amounted to 2.6 million metric tons (103.4 million bushels), with orders this week for the 2023-2024-market year amounting to 83,000 metric tons (3.2 million bushels).

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

The FAS Export Report for the week ending May 4^th reflecting market year 2022-2023, recorded outstanding export orders for soybeans amounting to 3.3 million metric tons (120.7 million bushels) with 47.5 million metric tons (1,745 million bushels) actually shipped. Net weekly soybean orders attained 62,200 metric tons (2.3 million bushels) with 0.4 million metric tons (15.1 million bushels) shipped for the past week. For the current market year to date outstanding sales of soybeans are 0.6 percent less than for the corresponding week a year ago. Outstanding sales recorded for market year 2023-2024 amounted to 1.9 million metric tons (69.4 million bushels) with 50,100 metric tons (1.8 million bushels) sold this past week.  (Conversion 36.74 bushels per metric ton)

For the week ending May 4^th 2022 net orders of soybean meal and cake amounted to 277,800 metric tons for the market year 2022-2023. During the past week 188,100 metric tons of meal and cake combined was shipped, representing 2.5 percent of the total 7,440,000 metric tons exported during the current marketing year. This quantity to date is 0.3 percent higher than the volume for the corresponding period of the previous market year. For the next market year outstanding sales have attained 315,400 metric tons with 11,000 metric tons ordered this past week.

The annual 2023 USDA Prospective Plantings Report, released on March 31^st predicted:-

• Corn area planted for all purposes in 2023 will attain 92.0 million acres, up 4 percent or 3.42 million acres from last year. Compared with last year, planted acreage is expected to be up or unchanged in 40 of the 48 estimating States.
• Soybean area planted for 2023 is estimated at 87.5 million acres, up slightly from last year. Compared with last year, planted acreage is up or unchanged in 15 of the 29 estimating States.
• Crushers are expected to produce 54,475 million tons of soybean meal. Ending stocks will be up 35.0 percent to 450,000 tons depressing price from the previous season by 8.8 percent to $410 per ton.

The preference for corn is based on a favorable corn to soy benefit ratio.

Actual 2022 corn and soybean harvests and projected ending stocks were documented in the April 11^th WASDE #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.  Values will be updated when WASDE #636 is released on May 12^th incorporating planting intentions, harvests in South America and world trade.

COMMODITY PRICES

The following quotations for the months of delivery as indicated were posted by the CME at 14H00 EDT on May 11^th 2023, compared with values at 14H00 on May 4^th 2023  (in parentheses): -

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

Corn:                   May quotation down 13 cents per bushel.     (-2.1 percent)

Soybeans:          May quotation down 12 cents per bushel      (-0.8 percent)

Soybean Meal:  May quotation down $8 per ton                       ( -1.9 percent)

The NASDAQ spot prices for feedstuffs per short ton at noon on May 11^th 2023 with prices for the previous week were:-

• Corn (ZC): $231 was $230 (up 0.4 percent from the previous week).  52-week range $198 to $289
• Soybean Meal (ZM): $420 was $425 (down 1.2 percent from the previous week). 52-week range $403 to $484
•  

Values for other common ingredients per short ton:-

• Meat and Bone Meal, (According to the USDA National Animal By-product Feedstuffs Report on May 5^th): $475 to $525 for porcine (ex MN);  $440 to $475 for ruminant (ex Central states). 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) $275 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 May 5^th for MO. and other states: $140 to $170 per ton (Current value reflect wheat price following the disruption of production and shipping from Ukraine and from U.S and world weather extremes)
• Bakery Meal, (MO & TX): $215 to $240 per ton  (down $10 per ton on the low end)
• Rice Bran, (AR & TX): $180 to $240 per ton. (down $40 on the low end and down $15 on the high end)

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 May 11^th compared with May 3^rd would decrease nest-run production cost for eggs by 0.1 cent 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 85.7 percent (85.9 percent last week) of the U.S. ethanol fermentation volume was operational, based on the January 2022 U.S. EIA capacity data. The outlook for increased production will depend on higher domestic demand, from summer driving in addition to increasing the quantity that is exported.

During January 2023  (the last month for which data is available) ethanol exports attained 118 million gallons (2.81 million barrels), up 63.8 percent from December 2023 with 40.3 percent to Canada; 15.2 percent to the U.K.; South Korea, 12.2; India, 7.1; E.U. Nations, 6.4; Central and South America, 6.3; Mexico, 4.1; Caribbean, 0.5; China, 0.5 percent. Brazil has not imported ethanol from the U.S. since November 2022.

According to the U.S. EIA, for the week ending May 5^th 2023 the industry produced on average 965,000 barrels of ethanol per day. This was 1.1 percent down from the week ending April 28^th 2023 and continuing below the one million gallon per day benchmark. On May 5^th ethanol stock was down 0.3 percent from the previous week to 23.3 million barrels, representing an approximately 20 day reserve and confirming lower demand, 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 quarter of 2023 although this projected volume was exceeded. The short-term prospects for increased 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 without extensive capital investment in tanks and multi-blend pumps,

Current Energy Prices:-

• Ethanol quoted on the CBOT (EH) on May 11^th was priced at $2.16 per gallon unchanged over previous months due to lack of trading and compared to a 52-week range of $2.16 to $2.19 per gallon.
• On May 11 RBOB gasoline traded on NASDAQ (RB) at $2.50 per gallon, up 18 cents (7.8 percent) from the previous week. The 52-week range for RBOB gasoline is $2.08 to $4.28.
• The CME WTI crude price is ignoring concern over possible lower supply due to announced OPEC production cuts and predictions for a World recession. Price was up $2.07 (3.0 percent) to $71.11 per barrel on May 11^th compared to the previous week. Hydrocarbon sources of energy are now contributing less to inflation than during the first quarter of 2023.
• The AAA national average regular grade gasoline price was $3.54 per gallon on May 11^th down 5.0 cents (1.4 percent) lower than last week. Gasoline is now $1.38 per gallon more expensive than ethanol but with a 63 percent higher BTU rating.
• The AAA national average diesel price was $4.04 per gallon on May 11^th, seven cents per gallon (1.7 percent) lower than the previous week but with prospects of a future rise in price due to a low national stock, but modulated by the WTI price.
• CME Henry Hub natural gas was priced at $2.17 per MM BTU on May 11^th unchanged from the previous week and close to the 2023  market bottom.

INGREDIENTS

DDGS is freely available with most plants among the 192 operational on January 1^st 2022 (the last available estimate) with a combined capacity of 1,134 million barrels per day functioning at 85.7 percent. The University of Missouri Extension Service By-Product Feed Price Listing priced DDGS at $275 to $320 per ton on May 11^th. 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 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 fluctuates in price

The CME soybean price for May 2023 delivery at 14H00 on May 11^th was down 0.8 percent to 1,442 cents per bushel compared to the previous week at 1,454 cents per bushel for May delivery. The current price of soybeans is a reflection of availability for domestic crushing, consumption and export orders. Soybean meal was down 1.9 percent to $420 per ton for May 2023 delivery. Prices are obviously influenced by projections of harvest in the three major producing nations in South America coupled with domestic and international demand for soy oil and meal.

According to a release on April 17^th by the National Oilseed Processors Association, whose members process 95 percent of the U.S. crop, 185.8 million bushels of soybeans were crushed in March 2023, the second highest March crush recorded and higher than estimates averaging 183.4 million bushels. Crush volume was up 12.1 percent from the previous month of February 2023, at 165.4 million bushels.

On May 11^th the CME spot price for soybean oil was down 1.4 cents per lb. (2.7 percent) from the previous week to 51.4 cents per lb. Prices for vegetable oils have fluctuated over past weeks but with supplies in excess of demand especially for Asian palm oil. Nevertheless 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 Russia. It is anticipated that 41 percent of U.S. soy oil was diverted from fuel to biodiesel during 2022.

On May 11^th, the soybean meal spot price quoted on NASDAQ was $420 per ton, $5 per ton lower than the spot price last week and compared to a 52-week range of $378 to $496 per ton.

On May 11^th Meat and Bone meal was priced over a range of $440 to $525 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 May 11^th the conversion of the CNY to the BRL was BRL 0.71 up CNY 0.02 from last week. The conversion of the CNY to the US$ was CNY 6.95, down CNY 0.4 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 March 11^th 2023 WASDE #635, the USDA quarterly Grain Stocks Report and the USDA Grains and Oilseeds Outlook posted under the STATISTICS Tab.

Currently there is restricted operation of the Black Sea Grain Initiative (BSGI) allowing Ukraine to ship commodities from functioning ports. 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. Since inception of the agreement 24 million tons of grains have been exported through the Black Sea Corridor. The BSGI has been extended beyond the March 18^th termination date but only for 60 days. It is unknown whether the United Nations negotiators relaxed sanctions on exports of Russian agricultural commodities including fertilizer to achieve a settlement. Extension of the BSGI is unlikely given the reluctance of the G7 and NATO nations to lift sanctions on the Russian Federation.