DAWN FOODS WEEKLY COMMODITY REPORT July 22, 2016 · 7/22/2016 · DAWN FOODS WEEKLY COMMODITY...

DAWN FOODS WEEKLY COMMODITY REPORT July 22, 2016

Weekly Commodity Report

July 22, 2016 Headlines that Impact the Market

There were no major headlines in the news this week… Sugar/Sweeteners

The U.S. and Mexico are currently in talks to renegotiate the 2014 sugar trade pact between the two countries. The U.S. is attempting to put a new deal together to allow more Mexican sugar to cross the border, giving more access to supply for cane refiners.

Global sugar futures prices have started to ease over the last two weeks on expectations for a larger Brazilian crop and continued liquidation of a massive speculative long position. Leading global sugar trade house Czarnikow increased their global sugar production deficit estimates to 12.5 million metric tonnes and 9.8 MMT’s for old crop and new crop respectively. After months of lackluster demand, China stepped up and booked nearly 370,000 metric tonnes of raw sugar during the month of June. That number was up 54% from the same period a year ago. Flooding in parts of India may negatively impact their total sugar production outlook in the coming year.

7/22 7/15 7/8 7/1

Midwest Beet (No Freight) $30.00 $30.00 $30.00 $30.00

Midwest Cane (No Freight) $35.00 $35.00 $35.00 $35.00

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Bulk Sugar, No Freight ($/cwt)

$38.00

$36.00

$34.00

$32.00

$30.00

$28.00 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Cane $36.50 $35.88 $35.00 $35.00 $35.00 $35.00 $35.00 $35.00 $34.00 $34.60 $35.75 $36.00 $35.00

Beet $35.50 $35.13 $34.63 $33.20 $33.00 $33.00 $33.00 $32.00 $31.50 $31.30 $31.00 $31.00 $30.00

Corn

Corn futures dropped to new lows this week as U.S. corn conditions continue to be outstanding and the short

term weather outlook is less threatening with temps not as hot as feared earlier and with more widespread

precipitation forecast across the Corn Belt. The U.S. 2016 corn crop rating was 76% good/excellent, unchanged

from last week, up from 69% last year and the five-year average of 59%. This year’s rating is the fifth highest

of the past 30 years. Corn silking was 56% compared to 47% last year and the five-year average of 46%.

Ethanol production was up sharply in the latest week compared to the previous week (+2.5%). This was a new

weekly record in production, exceeding the previous record set in June 2016. Production was above last year by

a significant +5.8%. USDA reported U.S. corn sales, for the week ended 7/14/16, of 13.6 million bushels for

old crop and new crop was 19.9 million. Total sales were at the low end of trade expectations. Nevertheless,

2016/17 total export commitment is 73% above last year compared to the USDA forecast of 8% above.

The U.S. Department of Agriculture bureau in Buenos Aires lifted its estimate for Argentine planted corn area for 2016-17 to 4.5 million hectares - 300,000 hectares above the official USDA forecast, and representing a rise of 28% year on year. Argentina corn exports are forecast at 23 million tonnes (905 million bushels), a 21% increase from the current crop year. The 2016-17 world wheat crop looks to be a bumper harvest, prompting the USDA to forecast world wheat stocks at record levels for the third consecutive year in 2016/17. Also, large global supplies of cheap, poor quality wheat for animal feed is eating into demand for corn. This is likely to result in less global corn feeding and corn imports which will hurt the demand for U.S. corn.

7/22 7/15 7/8 7/1

Corn ($/bu) $3.35 $3.52 $3.55 $3.60

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Corn ($/bu)

$4.20

$4.10

$4.00

$3.90

$3.80

$3.70

$3.60

$3.50


Corn $4.06 $3.66 $3.79 $3.82 $3.63 $3.70 $3.66 $3.62 $3.65 $3.71 $3.94 $4.16 $3.51

Oil/Shortening The August soybean oil contract closed at $.3021 down 68 points for the week. The August soybeans closed

down 66 cents at $10.06 1/2 while the August soybean meal closed at $346.70 down $22.70 per ton. Be advised that we will be rolling to the September futures in the soybean complex next Thursday. The soybean

complex closed significantly lower this week as the most up to date weather forecasts continue to predict only minimal stress issues for the soybean crop as we head into the heart of the critical pod setting phase. New highs

for the move in the U.S. dollar and new lows for the move in the crude oil market helped to keep the soybean oil flat price in check but oil’s share of product value moved higher for a second consecutive week, topping the

31.0% level in the December position on Thursday. The sharp break in the soybean complex this week uncovered a large amount of pent up end user demand as most believe we have removed as much of the

weather risk premium that we can for now. The U.S. soybean crop is currently rated at 71% good to excellent,

unchanged from 71% last week and still well above the five year average of 58%. The current rating number is the fifth highest in the past thirty years for this point in the season. Soybeans setting pods were estimated at

18% compared to 7% last week, 14% year and the five year average of 13%. A note of caution however, August weather is the most critical for determining soybean yields, not a late July crop condition rating

number. Total 2015/2016 soybean oil sales are now up nearly 49% on the year and the USDA’s current export projection still looks at least 150 million pounds too low. New crop sales are already up 165% vs. last year.

Palm oil prices have made at least a temporary bottom, posting 2 week highs on Thursday after dropping to 10 month lows last week. Exports of Malaysian palm oil products for the July 1 through July 20 period rose 15.3% and as we had mentioned last week, this is likely due to the need for China and India to step up their buying programs given the current historically low stock levels in both countries. Oil World pegged total Chinese soybean imports for the 2016/2017 crop year at 81.5 million metric tonnes, well below the current USDA estimate at 87.0 MMT and down from 83.0 MMT in 2015/2016.The Chinese are in the process of auctioning off reserve soybean stockpiles internally and many feel that they will not need to replace most of that volume. If confirmed, this would be the first drop in global Chinese soybean demand in 15 years.

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7/22 7/15 7/8 7/1

Soybean Oil (fob Decatur) $0.2925 $0.2975 $0.2875 $0.2950

Canola Oil (fob Midwest) $0.3350 $0.3400 $0.3300 $0.3375

Palm Oil (fob dock) $0.3175 $0.3100 $0.3175 $0.3225

Lard (fob Chicago) $0.3300 $0.3300 $0.3300 $0.3300

Soybean & Palm Oil ($/lb)

$0.36

$0.35

$0.34

$0.33

$0.32

$0.31

$0.30

$0.29

$0.28

$0.27


Soy $0.32 $0.29 $0.27 $0.28 $0.27 $0.30 $0.30 $0.31 $0.31 $0.33 $0.30 $0.31 $0.29

Palm $0.32 $0.30 $0.29 $0.31 $0.30 $0.30 $0.30 $0.31 $0.32 $0.35 $0.35 $0.33 $0.32

Dairy

Butter production remains active across the country as prices took a small step backwards this week. Even through cream supplies are much tighter, there is still adequate supply to support butter manufacturing needs. With butter inventories at 5+ year highs, a few churns in the East have been microfixing to control their cold storage inventories but strong retail demand has supported production in the rest of the U.S. Butter imports in June were reported at 1.2 million pounds, up 58% from a year ago levels.

Farm level milk production has been trending lower as warmer temperatures have been advancing in the U.S. Overall milk supplies remain adequate in comparison to current demand. Schools will start to look at refilling their pipeline in the next few weeks. Demand from ice cream manufacturers remains strong.

7/22 7/15 7/8 7/1

Cash Butter (TL/No Frt.) $2.29 $2.32 $2.28 $2.35

Nonfat Dry Milk (Hi Heat) $1.02 $0.98 $0.98 $0.98

Dry Buttermilk $0.88 $0.86 $0.86 $0.84

Whey Powder $0.30 $0.30 $0.29 $0.28

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Dairy Prices ($/lb)

$3.25

$2.75

$2.25

$1.75

$1.25


Nonfat Dry $1.11 $1.05 $1.06 $1.17 $1.18 $1.16 $1.15 $1.14 $1.10 $1.01 $0.97 $0.98 $0.99

Butter $1.93 $2.19 $2.72 $2.52 $2.89 $2.26 $2.17 $2.08 $1.98 $2.06 $2.06 $2.25 $2.31

Wheat/Oats

The September K.C. wheat futures contract closed at $4.19, up 5 1/4 cents for the week. The Chicago and Minneapolis September futures contracts closed up ½ of a cent and down 1 1/2 cents at $4.24 3/4 and $4.95 1/4 respectively. Wheat futures made new contract lows early this week as the supply picture remains decidedly negative. Increasing potential for a record Russian crop, adjustments higher for the Australian and Canadian crops and record winter wheat yields in the U.S. all continue to be bearish forces. Lower corn prices and a stronger U.S. dollar also contributed to the negative tone. Despite the continued bearish news, the markets

closed mixed to slightly higher for the week, potentially signaling that prices are low enough for now. The U.S. Spring Wheat crop tour kicks off on Monday and it is likely that the focus will be as much on protein as it will on yields given the low winter wheat protein numbers that continue to come in. The Spring wheat harvest has just begun in South Dakota. Weekly wheat export sales for 2016/2017were reported at 477,900 tonnes, within the range of expectations between 350,000 and 550,000 tonnes. Export sales are now running about 30% ahead of last years anemic pace. In its weekly crop progress report, the USDA had the winter wheat harvest at 76% complete compared to 66% last week and the five year average of 73%. Yield reports continue to come in at or near record levels. The U.S. Spring wheat crop was rated at 69% good to excellent, down from 70% last week and compared to 70% last year. 96% of the crop was already headed compared to the five year average of 81%.

7/22 7/15 7/8 7/1

Soft Wheat $4.25 $4.25 $4.35 $4.30

Spring Wheat $4.95 $4.97 $5.01 $5.00

Kansas Wheat $4.19 $4.14 $4.21 $4.12

Oats $2.08 $2.04 $1.95 $1.91

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Wheat Future Prices ($/bu)

$6.00

$5.75

$5.50

$5.25

$5.00

$4.75

$4.50

$4.25


Spring $5.69 $5.09 $5.12 $5.21 $5.11 $5.06 $4.99 $4.90 $5.08 $5.28 $5.32 $5.34 $4.98

Soft $5.47 $4.99 $4.87 $5.05 $4.94 $4.78 $4.77 $4.58 $4.64 $4.68 $4.72 $4.82 $4.29

Hard $5.36 $4.78 $4.85 $4.91 $4.66 $4.73 $4.73 $4.50 $4.71 $4.65 $4.55 $4.57 $4.17

Flour

Bookings of flour expanded this week on stabilizing flour prices near some of the cheapest levels in quite a few years. Winter wheat harvest ran into some increased rainfall that slowed harvest slightly, but overall the crop is now more than 80% completed. Both the Chicago and Minneapolis futures contracts made new contract lows this past week, setting multi-year lows in the process. Kansas City wheat futures traded a penny away from recent lows. Protein reports during the HRW wheat harvest continue to come in right around the 11.2% level, down substantially from the prior year. This will make the old crop – new crop transition much more difficult for the millers and have kept support under basis quotes. The continued weakness in the corn market has kept pressure on millfeed values, as has the abundance of other feed ingredients available to the market. Current Q3 coverage is estimated at 80% complete, with Q4 approaching 40% finished.

7/22 7/15 7/8 7/1

Spring Flour $12.85 $12.85 $13.60 $13.65

Hi Gluten Flour $15.85 $15.85 $16.60 $16.65

Kansas Flour $12.65 $12.15 $13.10 $12.85

Cake Flour $13.35 $13.45 $13.75 $13.70

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Bulk Flour ($/cwt)

$17.00

$16.50

$16.00

$15.50

$15.00

$14.50

$14.00

$13.50

$13.00

$12.50


Spring $16.21 $13.36 $13.14 $14.51 $15.00 $14.23 $14.00 $13.38 $13.51 $14.27 $14.30 $14.36 $13.24

Cake $16.71 $15.16 $14.28 $15.52 $15.59 $15.21 $15.38 $14.69 $14.33 $14.40 $14.71 $14.90 $13.56

Cocoa

September cocoa futures prices fell sharply during this past week to new 3-1/2 month lows and finished the week down almost 6%. Weaker demand out of Asia helped to pressure prices lower after Q2 Asian cocoa processing rose only 2.8%, below expectations of a 4.5% increase. A recent Nielsen report has shown chocolate sales have been stagnant and that global chocolate sales fell 2% in the last nine months through May.

Cocoa Powder ($/lb)

$1.60

$1.50

$1.40

$1.30

$1.20

$1.10


Cocoa $1.43 $1.50 $1.41 $1.35 $1.30 $1.31 $1.29 $1.29 $1.29 $1.29 $1.28 $1.13 $1.10

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Eggs

Egg prices remained under pressure again this week as the abundant supplies are limiting any price support. As of Monday, the number of shell eggs available was the highest ever for this time of year. Retail demand has been strong as consumer trends still favor a protein rich breakfast, but the loss of export business has been a major setback to producers. U.S. egg producers (pre-bird flu) used to export up to 6% of their stock, but now that number is closer to 3% due to export bans.

7/22 7/15 7/8 7/1

Frozen Whole $0.52 $0.52 $0.52 $0.52

Frozen Whites $0.52 $0.52 $0.52 $0.52

Frozen Yolks $0.95 $0.95 $0.95 $0.95

Dried Whole $1.85 $1.90 $1.90 $1.90

Dried Whites $3.85 $4.20 $4.25 $4.25

Dried Yolks $2.35 $2.35 $2.35 $2.35

Eggs ($/lb)

$3.00 $20.00

$18.00

$2.50 $16.00

(fro

zen

)

$2.00 $14.00

$12.00

Eg gs $1.50

$10.00

Wh

ol

e

$8.00

$1.00

$6.00

$0.50

$4.00

$2.00

$0.00

$0.00

Jul Aug Sep Oct Nov Dec Jan

Feb Mar Apr May Jun Jul

Whole (frozen) $2.50 $2.36 $1.79 $1.55 $1.45 $1.01 $0.77 $0.80 $0.71 $0.57 $0.56 $0.52 $0.52

Whites (dried) $18.75 $17.88 $14.81 $11.25 $9.33 $7.93 $7.33

$6.79 $6.06 $5.82 $5.60 $4.81 $4.14

Egg

Wh

ites

(d

ried

)

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Energy

(Bloomberg) – Oil traded near $43 a barrel in New York amid speculation that U.S. fuel stockpiles increased, bolstering a glut in the world’s biggest crude-consuming nation. West Texas Intermediate futures declined as much as 1.8 percent. U.S. gasoline supplies probably grew by 200,000 barrels last week, swelling stockpiles already at the highest seasonal level in at least two decades, according to a Bloomberg survey before a government report. Crude inventories, which are projected to have dropped a record 10th week, are also at the highest seasonal level in decades.

Crude has slipped more than 15 percent since early June after almost doubling from a 12-year low in February as supply disruptions from Nigeria to Canada trimmed a worldwide surplus. BP Plc, the first oil major to report second-quarter results, missed analyst estimates as lower prices continued to erode income and refining margins shrank. "Concerns about fuel inventories are weighing on the market," said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. "We are looking for further growth in gasoline supplies and there’s still a lot of crude in the tanks."

WTI for September delivery dropped 24 cents to $42.89 a barrel at 12:13 p.m. on the New York Mercantile Exchange. Futures touched $42.36 earlier, the lowest since April 20. Total volume traded was down 5.3 percent from the 100-day average.

U.S. crude stockpiles were at 519.5 million barrels in the week ended July 15, more than 100 million barrels above the five-year average, according to data from the Energy Information Administration. Crude production increased for a second week to 8.49 million barrels a day as the nation’s drillers put rigs back to work. U.S. crude output reached 9.61 million barrels in June 2015, the highest in more than 40 years.

7/22 7/15 7/8 7/1

Natural Gas $2.78 $2.76 $2.80 $2.99

Average Diesel $2.38 $2.40 $2.41 $2.42 Sources: USDA AMS Dairy Market News, USDA AMS Processed Eggs, U.S. Energy Information

Administration, Sosland Publishing Company, Reuters News, Dow Jones Newswires, RJ O’Brien, Bloomberg, Prophet X, NASS, USDA WASDE, J Gaines Consulting

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In Conjunction With

And the

Information and opinion contained herein are derived from, or based upon, facts and sources believed to be accurate, reliable and timely. However, Dawn Food Products, Inc. does not guarantee and cannot be responsible, in any way, for information or opinion herein, including accuracy, completeness, reliability or timeliness. Marketing and pricing decisions are the responsibility of the person or firm involved. This information is intended for direct use by Dawn’s sales team & valued customers and should not be shared with other outside organizations.

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DAWN FOODS WEEKLY COMMODITY REPORT July 22, 2016 · 7/22/2016 · DAWN FOODS WEEKLY COMMODITY...

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Transcript of DAWN FOODS WEEKLY COMMODITY REPORT July 22, 2016 · 7/22/2016 · DAWN FOODS WEEKLY COMMODITY...