Commodities

By Agrimoney.com – Published 24/06/2015

US ethanol production, which set a record last week, is poised for fresh all-time highs, as strong demand and the prospect of a “mini harvest” of corn support margins, broker Linn Group said.

An official report on Wednesday showed US ethanol production gaining 14,000 barrels a day last week to hit 994,000 barrels a day, the highest on data going back to 2010.

The rise in output came despite margins which have been pressed by the recovery in corn prices, with Chicago futures rebounding more than 5% from contract lows set in mid-June.

“We have seen production margins come down to breakeven in some areas on the fringes of the western Corn Belt,” said Jerrod Kitt at Chicago-based broker Linn Group.

Even in core areas of the eastern Corn Belt, with ready markets for the distillers’ grains feed ingredient made as a byproduct of ethanol manufacture, margins are about 10 cents a gallon, “give or take 5 cents”, he said.

‘Mini harvest’

However, Mr Kitt forecast that the rise in production was sustainable, in part thanks to the prospect of ready supplies of corn ahead, as farmers sell stocks left over from last year’s record harvest.

Mr Kitt said that “a lot of producers are sitting on a lot of corn,” with many growers holding out for higher prices, a strategy which has proved successful in many recent years.

A key US Department of Agriculture report next week is expected to show overall US corn inventories at 4.56bn bushels as of the start of this month, a rise of 18.5% year on year.

The boost to supplies as growers bring crop to market, to clear storage space for the next crop, will be akin to a “mini harvest”, with the potential for pressure on prices.

Inventories tumble

Meanwhile, demand is proving unexpectedly strong.

“The surprise about the latest ethanol data was not the rise in production but the drop in stocks,” Mr Kitt told Agrimoney.com, noting that inventories tumbled by 878,000 barrels last week to a five-month low of 19.84m barrels.

That is an unusually strong pace of decline and, coming against a backdrop of elevated production too, indicates robust demand for ethanol, which appears to be coming in part from strong exports.

“Canada is our number one export market, but others are pretty active too,” with ideas of strong shipments to the likes of North Africa and the Middle East too.

Booming market

And demand looks like remaining strong for now, with the US driving season ahead too.

“We are going to move between weeks of record production and record consumption,” Mr Kitt said.

“It is definitely going to be an exciting market, if you catch it right.”

March 18, 2014

By: Bloomberg

Soybean futures rose the most this month on speculation that demand is rising for supplies from the U.S., tightening inventories. Wheat and corn also rallied.

Processors in the U.S. used 141.6 million bushels of soybeans to make animal feed and cooking oil in February, up 3.9 percent from the same month last year, the National Oilseed Processors Association said yesterday. Exporters shipped more than three times as many soybeans in the week ended March 13 than a year earlier, with 55 percent headed for China, the world’s biggest buyer, the U.S. Department of Agriculture said.

“Export demand continues to be strong, and soybean crushing rates remain very active,” Greg Grow, the director of agribusiness for Archer Financial Services Inc. in Chicago, said in a telephone interview.

Soybean futures for delivery in May rose 1.6 percent to $14.14 a bushel at 11:03 a.m. on the Chicago Board of Trade, heading for the biggest gain since Feb. 28. The price earlier touched $14.195, the highest since March 11

U.S. shipments of soybeans since Sept. 1 reached 38.9 million metric tons as of March 13, up 22 percent from the same period a year earlier, government data show. Before today, futures fell 4.5 percent since reaching a nine-month closing high of $14.5775 on March 7. Abiove, a soy-processors group in Brazil, cut is forecast for the domestic harvest this year to 86.1 million tons, from 87.6 million estimated in January.

Grain prices rose as dry, cold weather reduced crop conditions in parts of the U.S. Great Plains last week, Grow said. More low temperatures forecast over the next two weeks will delay thawing of Midwest soils and may delay optimal planting for corn and wheat in April, Grow said.

Wheat futures for May delivery rose 2 percent to $6.88 a bushel in Chicago. Corn futures for May delivery gained 1.4 percent to $4.855 a bushel.

SEPTEMBER 23, 2013
By: University News Release

Shifting grain prices in the aftermath of the 2012 drought could mean a shift in input prices for 2014.
By Jennifer Stewart, Purdue University
Changes in the economics of grain production after drought that led to record-high farm incomes in 2012 could mean a shift in the demand for and prices of agricultural inputs for the 2014 crop, a Purdue Extension agricultural economist says.
The 2012 drought-ravaged crop left short supplies and high demand, with farmers receiving high prices for the grain they were able to produce and high insurance indemnities on covered crops that were destroyed. High grain-farm incomes capped a series of years with abnormally high grain prices. But with some drought relief in major corn- and soybean-production states leading to expected higher yields and lower commodity prices, grain farmers can expect to see changes in what they pay for inputs, such as seed, fertilizers, fuels and chemicals, for the 2014 crop.
An apparent shift in market demand for corn and soybeans also could play a major role in what it will cost growers to produce the next crop, Alan Miller said.
“The markets are currently saying they want more soybeans and less corn in 2014, which changes the demand for inputs,” he said. “For example, growers don’t need as much nitrogen fertilizer if they are growing less corn. That ultimately will affect the prices of inputs.”
The big story in 2014 crop production costs, Miller said, is fertilizer prices. Potash and phosphate prices have been declining since the fall of 2012 and are down 15-17 percent since last spring. Nitrogen prices peaked last spring and have dropped about 22 percent this fall. Farmers’ ability to apply fertilizer this fall will help determine what prices will look like for next spring.
“If weather or a late harvest were to keep farmers from applying fertilizers this fall, it could drive fertilizer prices down for the spring,” he said. “Normally, fertilizer prices hit bottom in the early fall, but we will have to wait and see is if the market is weak enough to sustain the drop into the spring.”
Nitrogen prices also are falling because the U.S. is now a low-cost producer. North American fertilizer producers are expecting historically strong sales this fall.
During the height of the ethanol boom, farmers were growing more corn and using more nitrogen. Plus, natural gas prices were high. Since then, natural gas prices have fallen, which has led to renewed interest in investing in domestic production capacity for nitrogen fertilizers. This leads to greater supplies of U.S.-produced nitrogen in the future if the cost of producing it here stays well below its market price as it is now.
“Corn growers really will start to see the full effect of more domestically produced nitrogen in 2015,” Miller said. “We have been importing more than 50 percent of our nitrogen fertilizer, meaning supply disruptions could easily impact prices. As we produce more of our own, we will import less. The bigger supply will benefit corn producers.”
Recent prices for nitrogen […]

SEPTEMBER 13, 2013
By: Bloomberg

Larger corn crop is expected to lower costs for distillers, could lead to re-opening ethanol plants.
Mario Parker
Ethanol plummeted to a three-year low, expanding its discount to gasoline, after a government report showed corn production will be higher than previously estimated, lowering costs for distillers.
The spread widened by 8.55 cents to 91.47 cents a gallon after the Agriculture Department said corn output will be 13.84 billion bushels this year, more than the 13.6 billion estimated in a survey of 34 analysts and trading firms by Bloomberg.
“The cheaper corn should turn on some of these plants,” said Jim Damask, a manager at StarFuels Inc. in Jupiter, Florida. “There’s a little more pressure on it after the report.”
Denatured ethanol for October delivery slid 3.5 cents, or 1.9 percent, to $1.848 a gallon on the Chicago Board of Trade, the lowest level since Aug. 24, 2010. Futures have dropped 16 percent this year.
Gasoline for October delivery rose 5.05 cents, or 1.9 percent, to $2.7627 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.
Corn for December delivery fell 6.25 cents, or 1.3 percent, to $4.6625 a bushel in Chicago. September corn slumped 0.75 cent to $4.79. One bushel makes at least 2.75 gallons of ethanol.
Record Planting
Farmers responded to last summer’s drought that destroyed crops by planting a record amount of acres of the grain. Higher corn costs had forced ethanol plants to shut or reduce output.
Ethanol production in the week ended Sept. 6 rose 3.5 percent to 848,000 barrels a day, data from the U.S. Energy Information Administration show. That’s down 12 percent from the record 963,000 barrels a day in December 2011.
Stockpiles last week climbed 0.3 percent to 16.3 million barrels, the most since Aug. 16. Ethanol blender inputs, a measure of demand, tumbled 3.1 percent to 834,000 barrels a day, an eight-week low. Imports dropped 59 percent to 15,000 barrels a day last week.
A 2007 energy law requires the U.S. to use escalating amounts of ethanol in gasoline. The government monitors adherence to the program by using tracking certificates attached to each gallon of biofuel called Renewable Identification Numbers, or RIN’s. The certificates can also be traded among companies.
Corn-based ethanol RIN’s slipped 1 cent to 63 cents, data compiled by Bloomberg show. Advanced RIN’s, which cover biodiesel and Brazilian sugarcane-based ethanol, were unchanged at 71 cents.

AUGUST 12, 2013
By: Bloomberg
(For Bloomberg fair value curves, see CFVL )
Aug. 12 (Bloomberg) — West Texas Intermediate crude fell for the sixth time in seven days as Japan’s economy slowed in the second quarter and the dollar strengthened.
Prices fell as much as 0.8 percent as Japan’s gross domestic product rose an annualized 2.6 percent, down from 3.8 percent the prior quarter, the Cabinet Office said. The dollar gained versus the majority of its 10 most-traded peers, reducing crude’s investment appeal. Bijan Namdar Zanganeh pledged to raise Iran’s output if he becomes the country’s oil minister.
“We had weak GDP data out of Japan,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The strong dollar is probably where some of the pressure is coming from. We are back to the trading band between $103 and $108.”
WTI for September delivery slid 76 cents, or 0.7 percent, to $105.21 a barrel at 9:14 a.m. on the New York Mercantile Exchange. The volume of all futures traded was 20 percent below the 100-day average.
Brent for September settlement dropped 60 cents, or 0.6 percent, to $107.62 a barrel on the London-based ICE Futures Europe exchange. Volume was 4.4 percent below the 100-day average. The European benchmark ’s premium to WTI was as little as $1.62, the narrowest on an intraday basis since Aug. 5.
Japan’s Economy
Second-quarter growth in Japan, the third-largest oil- consuming country after the U.S. and China, was slower than the 3.6 percent gain predicted by 32 economists in a Bloomberg survey. Consumer spending, which accounts for about 60 percent of the economy, contributed 1.9 percentage points to the annualized real growth rate.
The Bloomberg U.S. Dollar Index rose for the first time in seven days before a report tomorrow that may show a fourth straight monthly gain in retail sales, based on the median estimate of 64 economists. An increase might back the case for the Federal Reserve to reduce stimulus.
Fed Bank of Chicago President Charles Evans, who has been among the most vocal proponents of record monetary accommodation, said Aug. 6 that the central bank may begin curbing the $85 billion a month bond purchases in September.
Iranian Output
Zanganeh, a former Iranian oil minister nominated by President Hassan Rohani to take the post, said his “first action will be to bring the country’s oil production capacity back to 2005” levels, according to Shana, the Oil Ministry’s news website.
Iran, once the second-biggest producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia, has slipped to sixth place, producing 2.56 million barrels a day in July, according to a Bloomberg survey of producers and analysts. Its 2005 production averaged almost 4 million barrels a day.
Money managers reduced their bullish positions on WTI for a second week on speculation that the Fed will scale back stimulus. Hedge funds cut net-long positions, or wagers that prices will rise, by 2.5 percent to 310,827 futures and options combined in the seven days ended Aug. 6, the Commodity Futures Trading Commission said in its […]