DAWN FOODS WEEKLY COMMODITY REPORT July 8, 2016 · 7/8/2016 · DAWN FOODS WEEKLY COMMODITY REPORT...

DAWN FOODS WEEKLY COMMODITY REPORT July 8, 2016

Weekly Commodity Report

July 8, 2016 Headlines that Impact the Market

No major headlines in the news this week…

Sugar/Sweeteners

The U.S. sugar beet crop is progressing nicely and with normal weather this season we could see record production. Domestic beet processors are still struggling to get sugar sold for the balance of 2016 and prices remain under pressure.

The United Nations’ food-price index jumped 4.2 percent in June, the most since July 2012, the group’s Food & Agriculture Organization said on its website. The gauge, which monitors 73 different food prices, advanced for a fifth month in the longest run since 2011. Food costs are now the highest in almost a year, partly after raw-sugar futures rallied 16 percent last month. Speculators have boosted bullish bets on the sweetener to a record amid forecasts for a second year of supply shortages. Brazil is the world’s largest sugarcane producer, accounting for 39 percent of world production. Sugarcane is nearly the exclusive ethanol feedstock in Brazil. Production of both sugar and ethanol in Brazil has expanded rapidly since the mid-1990s. Sugarcane production reached 640 million tons in 2014, up 188 percent since 1991, while over the same time, the share used for ethanol production declined from 72 percent in 1991 to a low of just over 49 percent in 2003 and a 2014 level of 55 percent.

7/8 7/1 6/24 6/17

Midwest Beet (No Freight) $30.00 $30.00 $31.00 $31.00

Midwest Cane (No Freight) $35.00 $35.00 $36.00 $36.00

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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

It was a volatile week in corn futures. Futures plunged early in the week on favorable weather conditions and solid corn crop ratings but were up sharply at week’s end as the market ran out of selling and reestablished some risk premium for the possibility of a heat wave in the last half of July. The U.S. 2016 corn crop rating was 75% good/excellent, unchanged from last week, up from 69% last year and the five-year average of 64%. This year’s rating is the fifth highest of the past 30 years. USDA reported U.S. corn sales, for the week ended 6/30/16, of 14.6 million bushels were the lowest weekly sales since the last week of January. Nevertheless, 2016/17 total export commitments are 216 million bushels vs 127 million at this time last year.

Brazil 2015-16 corn production is estimated at 69.1 MMT vs. 76.2 MMT in June, Brazilian crop agency Conab says. Conab’s estimate was well below the average estimate of five analysts surveyed by Bloomberg of 75.9 MMT, and down 18% from 2014-2015 production of 84.7 MMT. Global corn production in 2016-17 season is estimated at 1,018 MMT, down from June forecast of 1,027 MMT, according to UN FAO-AMIS due to concerns that hot, dry weather reduced Brazil’s corn crop. Ending stocks are forecast to drop for the second straight year, seen at 207 MMT vs. June estimate of 214 MMT. Brazilian farmers will increase acreage dedicated to corn in the September planting season for the first time in almost a decade, but soybeans will account for the bulk of Brazil's grain expansion, an informal poll of nine analysts, traders and agronomists by Reuters showed. These experts estimated that Brazil's soybean area will grow by 3.5 percent to 34.3 million hectares, according to the results of the survey. In the winter planting season in early 2017, acreage for corn will increase by 771,000 hectares, or 7.5 percent, to 11.05 million.

7/8 7/1 6/24 6/17

Corn ($/bu) $3.55 $3.60 $3.85 $4.38

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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 $3.58

Oil/Shortening

The August soybean oil contract closed at $.3035 down 83 points for the week. The August soybeans closed down 81 cents at $10.83 1/4 while the August soybean meal closed at $376.30 down $27.90 per ton. The soybean complex took a hard turn south this week as better than expected rains over the long holiday weekend and improving longer term weather forecasts prompted waves of long liquidation. Soybeans and soybean meal were hit the hardest and although the flat price of soybean did move lower, its share of product value was able to stabilize above the 28.5% level in the spot position. In addition to the weakness in the soybeans and soybean meal, a new low for the move in the crude oil market, nine month lows set in the in palm oil and continued strength in the U.S. dollar weighed on the soybean oil market. The USDA will release updated supply/demand numbers next Tuesday. The average estimate for 2016/2017 soybean ending stocks is 287 million bushel compared to 260 million last month. We also look for the report to show an increase of 100 to 200 million pounds of soybean oil exports. The U.S. Census Bureau reported May canola oil imports at 352.6 million

pounds. Canola oil imports are now up 10.4% from last year after being up just 6.5% at the end of April. May palm oil imports were 191 million pounds and are now up 14.8% for the year to date. The U.S. soybean crop is currently rated at 70% good to excellent, down from 72% last week but still well above the five year average of 62%. The current rating number is the fifth highest in the past thirty years for this point in the season. The critical pod setting phase for most of the U.S. soybean crop will be due in late July/early August.

The USDA reported a 35,000 metric tonnes sale of U.S. soybean oil to China for the 2015/2016 crop year on Friday morning. The U.S. Ag Attache forecast total Chinese imports in 2016/2017 at 86.0 million metric tonnes, up from an estimated 83.0 MMT in 2015/2016. Steady growth in their poultry and hog sectors continues to drive higher soybean meal demand. Indian vegoil stocks are declining as buyers there are waiting for increased consumer demand before stepping up their buying programs. The annual Indian monsoon rains were 35% above average for the week ended July 8th which has helped to compensate for lower rainfall totals in June.

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7/8 7/1 6/24 6/17

Soybean Oil (fob Decatur) $0.2875 $0.2950 $0.3000 $0.3100

Canola Oil (fob Midwest) $0.3300 $0.3375 $0.3400 $0.3550

Palm Oil (fob dock) $0.3175 $0.3225 $0.3250 $0.3250

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 prices relaxed into Friday’s close, finishing lower on the week. Production remains active, but is running below the rapid pace during the first half of the year as cream supplies have tightened and butter cold storage for May hit 5+ year highs. The most recent NASS Dairy report showed butter production in Jan-May is up 5.6% from 2015, with May’s production at a 5+ year high as well.

The hotter and more humid weather across the nation is taking its toll on cow comfort levels and milk production as milk output is following seasonal trends lower. Ice cream production remains high, with producers continuing to soak up additional cream supplies available to the market.

7/8 7/1 6/24 6/17

Cash Butter (TL/No Frt.) $2.28 $2.35 $2.35 $2.37

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

Dry Buttermilk $0.86 $0.84 $0.85 $0.80

Whey Powder $0.29 $0.28 $0.28 $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 $0.98

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 $2.32

Wheat/Oats

The September K.C. wheat futures contract closed at $4.21 1/4, up 9 3/4 cents for the week. The Chicago and Minneapolis September futures contracts closed up 4 3/4 cents and up 1 cent at $4.35 and $5.01 respectively. Wheat prices were able to post very modest gains for the week despite weaker corn and soybean complex prices. The buying was primarily short covering in nature as the commodity funds have been loaded up on the short side for months. The global supply picture remains plentiful and has allowed for only minimal upside follow through as the winter wheat harvest wraps up over the next two weeks. Weekly wheat export sales for 2016/2017 were reported at 825,000 tonnes, well above the range of expectations between 400,000 and 600,000 tonnes.

In its weekly crop progress report, the USDA had the winter wheat harvest at 58% complete compared to 45% last week and the five year average of 55%. The crop was still rated as 62% good to excellent compared to 40% last year and yield numbers are off the charts. The U.S. Spring wheat crop was rated at 72% good to excellent, unchanged from 72% last week and compared to 70% last year. 74% of the crop was already headed compared to the five year average of 45%.

Black Sea wheat exporters Russia and Ukraine have started harvesting their wheat crops and are seeing higher yields and about the same quality as last year. Russia is expected to harvest a record crop this year and favorable weather has been improving prospects for the Ukraine’s crop since the Spring. Looks like more competition for U.S. exporters going forward.

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7/8 7/1 6/24 6/17

Soft Wheat $4.35 $4.30 $4.55 $4.81

Spring Wheat $5.01 $5.00 $5.18 $5.40

Kansas Wheat $4.21 $4.12 $4.23 $4.61

Oats $1.95 $1.91 $2.09 $2.08

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 $5.01

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 $4.33

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

Flour bookings were relatively steady this past week as price changes were minor across the major varieties. Wheat futures trading near new contract lows has helped incentivize end users to add coverage out into the fourth quarter of 2016 and even out into 2017. Even some flat price takers have been looking out into Q4 when current prices are at or below budgeted levels. A few millers even indicated inquiries into 2018 futures coverage. The basis component has been well supported near current levels as a lower protein HRW wheat is keeping a floor under the market. Also, the transition from old crop to new crop is shaping up to be bumpier than prior years as millers are shifting from a high protein crop to a much lower HRW crop this year. Q3 coverage is now approximately 70% complete, with Q4 bookings totaling about 30%.

7/8 7/1 6/24 6/17

Spring Flour $13.60 $13.65 $13.70 $14.65

Hi Gluten Flour $16.60 $16.65 $16.70 $17.65

Kansas Flour $13.10 $12.85 $13.35 $13.90

Cake Flour $13.75 $13.70 $14.20 $14.80

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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 $13.63

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 $13.73

Cocoa

Cocoa futures have been caught in a sideways trading pattern, chopping back and forth between the 3 month highs and lows. Prices finished the week higher despite weakness on Friday after Nielsen data showed global sales of chocolate declined 2% in the nine months through May. The bullishness of supply concerns out of the Ivory Coast seems to outweigh other factors as arrivals at Ivory Coast ports were down 12.2% from last year

during the October – July 3rd

period.

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 continue to struggle to put in new lows across the wide spectrum of egg products. Although feed prices have come down some recently, margins have eroded sharply in recent months as farmers forward coverage runs out and they are forced to use current prices in their formulas. Demand for shell eggs has been strong and has supported the recent increase in the national average price from the June lows.

7/8 7/1 6/24 6/17

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 $1.90 $1.90 $1.85 $1.90

Dried Whites $4.25 $4.25 $4.60 $4.75

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 $4.25

Egg

Wh

ites

(d

ried

)

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Energy

(Bloomberg) – Oil climbed from a two-month low as global equities rose, a weaker dollar boosted the appeal of commodities and a new disruption worsened supply problems in Nigeria. Futures advanced as much as 3.3 percent in New York. The dollar slipped against many of its peers, while stocks rose on the prospect of stimulus in major economies. Royal Dutch Shell Plc said the Trans Niger pipeline in Nigeria, capable of shipping 180,000 barrels a day, was halted after the discovery of a leak. U.S. crude stockpiles probably fell 3.25 million barrels last week, according to a Bloomberg survey before government data Wednesday.

"The weak dollar is clearly helping pull us higher," said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $4.9 billion. "We tested the low end of the range of $45 to $50 yesterday. Prices dropped below $45 and the buying started again." Oil has retreated three of the last four weeks as a rally spurred by supply disruptions in Nigeria and Canada and falling U.S. output lost momentum. Prices remain up about 70 percent from a 12-year low in February, a recovery that has prompted American producers to return drilling rigs to service. The rate of decline in non-OPEC supply will slow next year, OPEC said in a report Tuesday.

West Texas Intermediate crude for August delivery rose $1.37, or 3.1 percent, to $46.13 a barrel at 9:22 a.m. on the New York Mercantile Exchange. Prices slipped 1.4 percent to settle at $44.76 on Monday, the lowest since May 10. Total volume traded was 26 percent above the 100-day average. Brent for September settlement advanced $1.61, or 3.5 percent, to $47.86 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at an 97-cent premium to WTI for September delivery. U.S. inventories are forecast to drop for an eighth week, according to a Bloomberg survey. That would be the longest run of declines in more than a year. Stockpiles slipped by 2.2 million barrels to 524.4 million barrels in the week ended July 1, according to Energy Information Administration data.

7/8 7/1 6/24 6/17

Natural Gas $2.80 $2.99 $2.66 $2.62

Average Diesel $2.41 $2.42 $2.43 $2.43

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 8, 2016 · 7/8/2016 · DAWN FOODS WEEKLY COMMODITY REPORT...

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Transcript of DAWN FOODS WEEKLY COMMODITY REPORT July 8, 2016 · 7/8/2016 · DAWN FOODS WEEKLY COMMODITY REPORT...