Weekly Commodity, Economy and Energy Report: August 10^th 2023.

OVERVIEW

At 16H00 on August 10^th CME corn was up 0.4 percent compared to the previous week to 483 cents per bushel for September delivery. The fractional increase over the previous week was despite large inter-day fluctuation and influenced by weather and events in the Black Sea. Other factors included movement in the wheat market and profit taking. During the week 57 percent of corn acreage was located in drought areas compared to 31 percent for the corresponding week in 2022. Orders by China have resumed and with less concerns over weather and high demand for ethanol, prices were stable week-to-week.

Soybeans were down 5.5 percent from last week to 1,351 cents per bushel for September delivery. Prices during the week generally responded to events in Ukraine, predictions of crop size and ending stocks as influenced by lower acreage planted. During the week 51 percent of soybean acreage was located in drought areas compared to 28 percent for the corresponding week in 2022. Soybean meal was down 3.3 percent to $415 per ton for September delivery, reflecting predicted high crush-volume in July. 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 from the old crop as documented in the April WASDE Report and the forecast included in the July WASDE Report for the 2023 crop.

WTI was up 4.7 percent from last week rising $3.77 to $83.47 per barrel at close of trading on August 9^th despite strengthening of the U.S. Dollar. This advantage is offset by the May announcement of an ‘agreed’ production cut by OPEC and an intended voluntary cut by Saudi Arabia of one million barrels per day announced on June 4^th. Increases in WTI will be inflationary.

Factors influencing commodity prices in either direction over the past four

 weeks included:-

• Improved weather conditions in areas growing corn and soybeans accompanied by profit taking. (downward pressure).

• Geopolitical considerations moved markets this past week. Cancellation of the BSGI in July and destruction of 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 may be moving to implement a Black Sea blockade on Ukraine with prospects for NATO intervention. (Upward pressure on corn and wheat and an indirect effect on soybeans)

• Macroeconomic factors:-
• A mild U.S. recession in 2023 appears even more unlikely following upgraded forecasts for Q3 GDP and evident stability in the bank sectors in both the U.S. and Europe. Large U.S. banks passed “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. Chairman Powell in Congressional testimony 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.
• 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 July 27^th announcement of the Q2 GDP confirmed a 2.4 percent annualized increase revised upward from a 2.2 percent projection.
• The August 10^th release of the July 2023 CPI confirmed an annualized increase of 3.2 percent with a core value of 4.7 percent. Food was up 4.9 percent and energy down 12.5 percent compared to the corresponding month of July 2022. The macro trend is clearly towards reduced inflation but with concern over escalation in energy and stubbornly high food prices.
• The July headline Producer Price Index (PPI), released on August 11th was up 0.3 percent over June breaking a series of monthly declines. Core PPI was up by 2.7 percent ove the 12-month period. Wholesale food was up 0.5 percent compared to a fall of 0.2 percent in June. The increase in the July PPI was attributed to a rise in the service sector. (Transitory upward pressure on markets)
• The Conference Board Consumer Confidence Index rose to 109.7 for June, up from 102.5 in May.
• New home sales were down 3.3 percent in June reflecting 7% mortgage rates. The rise in May was 12.2 percent compared to the corresponding month in 2022.
• On June 30^th the Personal Consumption Expenditure Price Index was up 3.8 percent from June 2022. Consumer spending during Q2 increased 1.6 percent representing 68 percent of economic activity. The Federal Reserve closely monitors this index as a measure of the trend in inflation.
• Non-farm payrolls increased to 209,000 during June, lower than the estimate of 240,000 as documented by the Bureau of Labor Statistics on July 7^th with an unemployment rate falling to 3.6 percent from 3.7 percent in May. Average hourly wage rate was up 0.4 percent from May and up 4.4 percent year over year. Wage rates are closely followed by the Federal Reserve FOMC. Job openings attained 9.58 million on June 30^th down 2.4 percent from May 31^st
• Jobless claims released on August 10^th attained 248,000 for the previous week up by 21,000 with 1.68 million continuing claims, down by 8,600.
• The ADP reported on August 7^th that private payrolls increased by 324,000, down 34.8 percent from the July report. This decline will not affect the probability of short-term future rate hikes. The ADP is regarded by the FOMC as an unreliable statistic

FACTORS INFLUENCING COMMODITY PRICES

• Dry weather in the Midwest during early June has now transitioned to intermittent rain effectively lowering prices for corn and soybeans. Rains have relieved drought over the Southern plains although wheat yield and acreage to be harvested will be sharply reduced in Kansas with an indirect effect on corn. (Downward pressure on prices with firmer indications yields in the July 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 possibly delayed until the end of the year over SNAP eligibility and other entitlements that 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 in late September to avoid shutdowns at the end of the Federal fiscal year. This situation is creating uncertainty and impacting equity and commodity markets.

• The July 12^th WASDE #638 documented higher soybean production and a near record corn harvest for the new crop with increased world availability despite drought in the Argentine. The July WASDE confirmed the damage caused by the transitory drought in the Midwest during late May through mid-June by reducing the projected yield of corn from the June report. The U.S. will export 12 percent of old crop corn resulting in an unchanged ending stock. Soybean exports will comprise 44 percent of the old crop with no change in ending stock. (Lower domestic prices)

• There is an expectation that 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 102.5 on August 9^th, down 0.1 points from last week. The DXY has ranged from 99.6 to 114.8 over the past 52-weeks. The dollar index influences timing and volume of export orders.

EXPORTS

The FAS Export Report released on August 10^th for the week ending August 3^rd reflecting market year 2022-2023, confirmed that outstanding export orders for corn amounted to 3.0 million metric tons (116.9 million bushels) with 47.8 million metric tons (1,883 million bushels) actually shipped. Net orders for the past week covering the 2022-2023 market year attained 0.15 million metric tons (5.9 million bushels). Shipment of 0.48 million metric tons (18.8 million bushels) was recorded during the past working week. For the current market year cumulative shipments of corn to date are 34.6 percent lower than for the corresponding week a year ago. For market year 2023-2024 outstanding sales this week amounted to 6.0 million metric tons (235.1 million bushels), with net sales this week for the 2023-2024-market year amounting to 0.76 million metric tons (29.9 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 August 3^rd reflecting market year 2022-2023, recorded outstanding export orders for soybeans amounting to 2.4 million metric tons (87.3 million bushels) with 50.8 million metric tons (1,866 million bushels) actually shipped. Net weekly soybean orders attained 0.4 million metric tons (14.9 million bushels) with 0.4 million metric tons (14.0 million bushels) shipped for the past week. For the current market year to date cumulative shipments of soybeans are 7.3 percent lower than for the corresponding week a year ago. Outstanding sales recorded for market year 2023-2024 amounted to 9.2 million metric tons (337.5 million bushels) with 1.1 million metric tons (40.3 million bushels) sold this past week. (Conversion 36.74 bushels per metric ton)

For the week ending August 3^rd 2023 net orders of soybean meal and cake amounted to 144,100 metric tons for the market year 2022-2023. During the past week 217,400 metric tons of meal and cake combined was shipped, representing 2.0 percent of the total 10,656,800 metric tons exported during the current marketing year. This quantity to date is 5.0 percent higher than the volume for the corresponding period of the previous market year. For the next market year outstanding sales have attained 1.6 million metric tons with 285,800 metric tons ordered this past week.

The June 30^th 2023 USDA Planted Acreage Report, and the July 12^th 2023 WASDE confirmed:-

• Corn area planted for all purposes in 2023 (‘new crop’) will attain 94.1 million acres, up 6.2 percent or 5.5 million acres from last year. Compared with last year, planted acreage is expected to be up or unchanged in 43 of the 48 estimating States. According to the July WASDE, yield was lowered to 177.5 bushels per acre with a resulting 2,262 million bushel ending stock. The USDA retained the average season price to 480 cents per bushel.
• Soybean area planted for 2023 is estimated at 83.5 million acres, down 5.5 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 July WASDE yield was held at 52.0 bushels per acre with a resulting 300 million bushel ending stock with the USDA projecting an average season price of 1,240 cents per bushel.
• Crushers are expected to produce 54,175 million tons of soybean meal. Ending stocks will attain 400,000 tons increasing the USDA projected price from the previous season by $10 to $375 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 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 July WASDE #638 posted in this edition. WASDE #639 will be reviewed in the August 18^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 August 10^th 2023, compared with values at 14H00 on August 3^rd 2023 (in parentheses): -

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

Corn: Sept. quotation up 2 cents per bushel. (+0.4 percent)

Soybeans: Sept. quotation down 78 cents per bushel (-5.5 percent)

Soybean Meal: Sept. quotation down $14 per ton (-3.3 percent)

The CME spot prices for feedstuffs per short ton at close of trading on August 9^th 2023 with prices for the previous week were:-

• Corn (ZC): $176 per ton was $179 (down 1.7 percent from the previous week . 52-week range $171 to $236
• Soybean Meal (ZM): $393 per ton was $392 (up 0.3 percent from the previous week). 52-week range $389 to $439

Values for other common ingredients per short ton:-

• Meat and Bone Meal, (According to the USDA National AnimalBy-product Feedstuffs Report on August 4^th): $425 to $500 per ton (Av. $475 per ton) for porcine (ex MN); $400 to $475 per ton (Av. $440 per ton) for ruminant (ex central states). Price varies according to plant and location
• According to the USDA National Mill-Feeds andMiscellaneous Feedstuffs Report on August 4^th DDGS, (IA. and other states) was priced at $195 to $240 (Av. $225 per ton). Price varies according to plant and location and is expected to fluctuate with the price of corn
• According to the University of Missouri Extension Service By-Product Feed Price Listing on August 8^th wheat middlings from IL. and other states: $160 to $180 per ton (Av. $165 per ton) (Current value reflect wheat price following the disruption of shipping from Ukraine, drought in the U.S and world weather extremes)
• 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 August 9^th compared with August 2^nd 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 90.4 percent (94.3 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 May 2023 (the last month for which data is available) ethanol exports were down 10.1 percent from April to 116 million gallons (2.70 million barrels). Importing nations and regions of significance and their proportions of total volume for the month included:- 33.7 percent to Canada; 29.4 percent to Europe.; 8.5 percent to South Korea; 12.3 percent to Central and South America; 1.3 percent to Mexico.

According to the U.S. EIA, for the week ending August 4^th 2023 the industry produced on average 1,023,000 barrels of ethanol per day. This was down 4.1 percent from the week ending July 28^th 2023 but continued weekly production above the one million gallon per day benchmark. On August 4^th ethanol stock was down <0.1 percent from the previous week to 22.9 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 is 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 August 9^th was priced at $2.16 per gallon, unchanged from last week. The 52-week range is $2.14 to $2.19 per gallon.
• On August 9^th RBOB gasoline traded on NASDAQ (RB) at $2.93 per gallon, up 15 cents (5.4 percent) from the previous week. The 52-week range for RBOB gasoline is $2.08 to $4.28.
• The CME WTI crude price has largely ignored concern over a possible World recession and a predicted lower supply due to a previously announced OPEC production cut to commence in July and a voluntary one-million barrel per day reduction by Saudi Arabia revealed on June 4^th. Price was up $3.77 per barrel, (4.7 percent) to $83.47 per barrel on August 9^th compared to the previous week. Hydrocarbon sources of energy are now contributing to inflation compared to the second quarter of 2023.
• The AAA national average regular grade gasoline price was $3.83 per gallon on August 9^th, up 3 cents per gallon (0.8 percent) from last week. Gasoline is now $1.67 per gallon more expensive than ethanol but with a 63 percent higher BTU rating. Future rises in fuel cost are inevitable given the rise in benchmark WTI
• The AAA national average diesel price was $4.21 per gallon on August 9^th, up 11 cents per gallon (2.7 percent) from the previous week but with prospects of a future increases due to a low national stock and a rising WTI price.
• CME Henry Hub natural gas was priced at $2.96 per MM BTU on August 9^th up 48 cents per MM BTU (19.4 percent) from the previous week

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 90.4 percent. The USDA National Mill-Feeds andMiscellaneous Feedstuffs Report on August 4^th priced DDGS at $195 to $240 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 16H00 on August 10^th was down 5.5 percent to 1,351 cents per bushel. The current price of soybeans is a reflection of availability for domestic crushing, consumption and export orders. Soybean meal was down 3.3 percent to $415 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 July 15^th by the National Oilseed Processors Association, whose members process 95 percent of the U.S. crop, 165.0 million bushels of soybeans were crushed in June 2023, lower than the consensus of estimates averaging 170.6 million bushels. Crush volume was down 7.3 percent from the previous month of May 2023, at 177.9 million bushels. The July crush data will be posted in the August 18^th edition.

On August 9^th the CME spot price for soybean oil was down 0.4 cents per lb. (0.7 percent) from the previous week to 60.3 cents per lb. Prices for vegetable oils have fluctuated over past weeks but with supplies in excess of demand especially for Asian crude palm oil near a 2-year low. 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 August 9^th the soybean meal spot price quoted on NASDAQ was $393 per ton, $1 per ton higher than the spot price last week and compared to a 52-week range of $389 to $439 per ton.

On August 9^th Meat and Bone meal (porcine) was priced over a range of $425 to $500 per ton (Av. $475 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 August 9^th the conversion of the CNY to the BRL was BRL 0.68 down CNY0.01 from last week. The conversion of the CNY to the US$ was CNY 7.21,ndown CNY0.07 from the previous week as the U.S. Dollar 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) 

COMMENT

Subscribers are referred to the July 12^th 2023 WASDE #638, 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 functioning ports. 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.

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