Sean K. Treasure
The Baltic Dry Index finished the week at its lowest level in the past 52 weeks at 782 points. This is of particular interest to the global grain trade as the cost of getting product from point A to B is significantly less than it was a year ago. The biggest problem for vessel owners is one of overcapacity; The industry went on a building spree following the commodity buying bonanza of 2008 and with all the new dry bulk carriers now online, owners are now struggling to fill the extra space. As we say in the business, “the cure for high prices is high prices.” The opposite holds true as well. Though owners have benefited from lower bunker costs as a result of the decline in crude prices, don’t expect them to be content to operate at virtually break even for long. Something has to give and it will in time. More importantly for US shippers, the PNW/Gulf ocean freight spread to Asia remains significantly narrower than we normally see. In theory, this should incent more business to ship out of the Gulf vs. the PNW.
Export sales were relatively uneventful with the exception of corn. Corn sales for the holiday shortened week ended 12/25 totaled 895,100 MT. That’s down significantly from last week but given the time frame I’d say that’s a positive number. Wheat sales came in at 354,100 MT; certainly not a bullish figure there but again, it was a short week. Soybean sales totaled 611,000 MT. That’s not big enough to successfully ration the US crop and thus futures traded sharply lower. Keep an eye on sorghum sales. It’s been on a tear lately, being sold off at record pace. The Chinese are the big buyers; their appetite for feed is seemingly insatiable.
Grain futures were doggy across the board this week with the beans leading the way down. Technically, things don’t look real positive. The last two days have painted some ugly sticks on the charts, Chicago wheat is particularly ugly. For the week, Chicago March wheat finished down 29 ½ cents, KC closed 27 ¼ lower and Minneapolis March finished down 20 ½ cents. March Corn closed down 19 cents and Jan beans finished 45 cents lower.
Not a lot of grain changing hands this week in domestic cash markets. Last week there was generally a rapid decline in premiums across the grain and oilseed spectrum. This week however, basis levels have largely remained unchanged with buyers not seeing any urgency to push bids and shippers not feeling any pressure from a farmer who’s largely disengaged from the market. It seems that traders are just keeping their heads down to finish the year out. Week ending bids are below.
Chicago Gulf PNW
Soybeans: +.05F .76H .80H
Corn: -.06H .47H .75H
SRW: +.35H .86H N/A
HRW: N/A .91H (12 Pro) .95H (11.5 Pro)
DNS: .75H N/A 2.50H (14 Pro)
SWW: N/A N/A .85H
Things were pretty quiet on the international front though I expect business to pick up given the general decline in both commodity and shipping costs:
· Iraq bought 200,000 MT of US, Canadian and Australian hard wheat. Including 100,000 MT of Canadian wheat at $331.65/MT C&F, 50,000 MT of US wheat at 333.87/MT C&F and 50,000 MT of Australian wheat at $325.93/MT C&F.
· Turkey bought 26,000 MT of feed barley for Dec shipment at $234/MT C&F.
· Turkey tendered for 100,000 MT of corn for Feb/March shipment.
· Russia gave assurances that despite efforts to curb exports, sales to Egypt will be delivered upon as contracted.
Happy trading!
Disclaimer: Commodity trading involves substantial risk and may not be suitable for everyone. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this wire and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.
