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News Flash: May 22, 2014


Corn Prices on the Defensive

The USDA’s May WASDE report projected that stocks of U.S. corn at the end of the current marketing year would total only 1.146 billion bushels, about 100 to 150 million bushels less than predicted. Since the release of that small forecast, corn prices have declined about $0.40 per bushel, in spite of some fundamental developments. The current pace of ethanol production, for example, exceeds the pace needed to consume the projected 5.05 billion bushels of corn for the marketing year. If ethanol production during the final 16 weeks of the marketing year persists at the rate for the week ended May 9, corn use would exceed the current USDA projection by 25 million bushels. The continuation of historically large ethanol crush margins should be supportive of ethanol production, but the magnitude of ethanol exports relative to imports will likely determine the level of domestic ethanol production over the next four months. Similarly, the weekly rate of exports and export sales of corn continue to exceed the pace needed to reach the USDA projection of 1.9 billion bushels for the marketing year. The market, however, seems to reflect concerns that actual export shipments will fall short of 1.9 billion bushels. The foreign corn crop is expected to be about the same size as this year’s crop with no significant change in the level of ending stocks. Exports of both corn and total feed

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grains from non-U.S. sources are expected to be slightly smaller than exports projected for the current marketing year. Projections for the U.S. corn market include expectations of a crop slightly larger than the record crop of 2013, a decline in both feed and residual use and exports, and a year-over-year increase in ending stocks of 580 million bushels. The market was surprised by the forecast of declining consumption and the resulting size of the expected build-up in year ending stocks. Prospects of a record large crop and record livestock feeding margins created expectations of larger feed and residual use of corn next year rather than smaller use. Similarly, the projected year-over-year decline in Chinese corn imports was a bit of a surprise. Some early concerns about the 2014 U.S. corn crop due to a slow start to the planting season have mostly dissipated. Concerns were alleviated by the USDA’s weekly Crop Progress report that indicated that planting progress in the 18 major corn producing states had caught up to average progress by May 11. There is now an expectation that the percentage of the crop planted late will not exceed the average percentage by a significant amount. Timely planting keeps yield expectations high. In addition, the outlook for summer weather is generally supportive for crop development. Still, there should be some concern about crop progress and yield prospects in northern growing areas where planting progress was well behind the average pace as of May 11. The USDA’s Acreage report to be released on June 30 will also reveal any acreage changes from intentions revealed in the March survey. Even though the current corn price decline seems to be a little premature given the strong pace of consumption and production uncertainty, a turn-around will likely require more convincing evidence of tighter balance sheets. In regards to the old crop balance sheet, the June 1 stocks estimate will be most important for updating year-end stocks estimates. New crop prospects will obviously unfold over a much longer time period. December corn futures have declined to within $0.15 of the spring projected price for crop revenue insurance, limiting further downside risk for the 2014 crop for those with high levels of revenue insurance coverage. Ag Web


Soybeans Climb to 11-Month High as Demand Rising in China

Soybeans climbed to the highest level in more than 11 months in Chicago on speculation that demand for livestock feed will increase in China, the biggest consumer of the oilseed. Chinese processors last week ordered about 600,000 metric tons of soybeans for shipment after Sept. 1, according to a Bloomberg survey. Soybean futures for July delivery rose 1.3 percent to $15.2525 a bushel on the Chicago Board of Trade. Earlier, the price reached $15.3675, the highest for a most-active contract since June 5. Up to this point, futures gained 16 percent this year. U.S. inventories as a percentage of use and exports are forecast to fall to the lowest since before 1964. U.S. exporters sold 120,000 tons of soybeans for delivery after Sept. 1, the USDA reported today. Weekly sales for delivery before Sept. 1 doubled to 164,435 tons from a week ago, boosting total commitments 3 percent above the USDA’s forecast for the season, the agency said in a separate report. Soybean-meal futures on China’s Dalian Commodity Exchange jumped 2.1 percent to the highest since October 2012, adding to speculation that the country will continue to increase imports. Corn futures for July delivery rose 0.4 percent to $4.765 a bushel in Chicago, heading for the first two-day advance since May 6. Bloomberg

Indian farmers could plant record soybean area as prices rally

Farmers in India are likely to boost the amount of land devoted to growing soybeans by up to 4 percent in the crop year that begins in July, as they look to profit from a rally in prices for the oilseed, an industry body said. That would help the world’s top importer of edible oils to cap overseas purchases and increase exports to neighboring Asian countries. Reuters


High stocks and crop potential pressure oilseed rape prices

Analyst Oil World has estimated the EU-28 rapeseed crop at a record 21.9m tonnes, a rise of about 600,000t on the 2013 harvest. The size of the EU crush is also expected to increase slightly, while EU rapeseed imports will fall next season because of the larger home-produced crop. Global stocks of seven major oilseeds are also expected to rise to a record of about 90m tonnes at the end of this season, an increase of 18m tonnes on a year earlier, while the US is expected to plant its largest soybean crop ever. With new-crop prices lower than they have been pre-harvest for four seasons, growers were sitting tight, said Owen Cligg, trading manager at United Oilseeds. He estimates that a maximum of 10 percent of new-crop oilseed rape has been committed by growers. However, new-crop export business was being done. Midweek trade valued old-crop oilseed rape at between £282/t and £289/t ex-farm, a drop of more than £40/t since the highs of just a few weeks ago. “Soya plantings are starting to make good progress in the USA, but the dynamic between corn and soya has still to fully play out. If corn plantings surge ahead as expected, this may mean less soya acres than anticipated occur. The weather pattern in the USA will then be a major factor to price direction, depending on how crops develop.” Gleadell Agriculture oilseed trader Jonathan Lane said French and German growers were also unwilling to sell. “Perhaps one could argue that if all farmers didn’t sell they could starve the market and in a normal year this might well be the case, but with Canada carrying 9m tonnes of stock there is a very real alternative for the international rapeseed consumers.” Prices could move sharply lower and there could be harvest pressure, he warned. US soya bean plantings are close to their five-year average, so there is no major concern from this angle, but Canadian plantings are being delayed by cold weather. US maize plantings romped on in the week ended 11 May to bring the total to just ahead of the five-year average.There is increasing speculation about whether there will be a so-called El Niño weather event which could bring favourable weather to the US Midwest. Farmers Weekly (UK)


VEGOILS-Palm oil at more than four-month low on technical selling

Malaysian palm oil futures fell for the fourth straight day on Wednesday, dropping to a four-month low after the weak Chinese edible oil markets and a stronger ringgit triggered technical selling. The benchmark August contract on the Bursa Malaysia Derivatives Exchange slid to 2,492 ringgit in early trade, a Jan. 15 low, before settling at 2,505 ringgit ($780) per tonne by Wednesday’s close, down 0.8 percent. Total traded volume stood at 36,314 lots of 25 tonnes, higher than the average 35,000 lots.” The market is a bit depressed. Palm is taking cues from weak external edible oil markets rather than its own export figures,” said a trader with a foreign commodities brokerage. “The Dalian soybean oil and palm olein prices are all trading lower,” the Kuala Lumpur trader added. The most active September soybean oil contract on the Dalian Commodities Exchange fell 0.8 percent in late Asian trade. September palm oil was also down 0.8 percent. The U.S. soyoil contract for July lost 0.1 percent. Technicals showed palm oil was expected to fall more to 2,472 ringgit per tonne, as support at 2,513 ringgit may not hold, said Reuters market analyst Wang Tao. “The market recovered after selling pressure exhausted below 2,500 ringgit,”said another Malaysia-based trader. “Buyers took this opportunity as prices were looking relatively cheap to satisfy festive demand.” Exports of Malaysian palm oil products have rebounded 19 percent between May 1-20 compared with the same period a month earlier, cargo surveyor data show, as buyers in India, Pakistan and the Middle East replenish stocks of the tropical commodity ahead of a Muslim festival. A strong ringgit, however, made the ringgit-denominated feedstock more expensive for overseas investors and refiners, pressuring prices. Reuters