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TopMarch 2016   

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TRADED COMMODITIES
lightcrudeLight Crude Oil

Nearby Futures barchart.com

March 28, 2016 (the PRICE Futures Group) by  Phil Flynn
Drain Game. The Energy Report 3/28/16
 
Crude oil prices are finding some support on the possibility that the oil supply will start to tighten in the future. Not only is the market speculating that we will see OPEC and non-OPEC nations agree to freeze output, but the reality that large oil companies are not replacing their reserves.

The Wall Street Journal is reporting that, "The world's biggest oil companies are draining their petroleum reserves faster than they are replacing them - a symptom of how a deep oil-price decline is reshaping the energy industry's priorities." The Journal reports, "in 2015, the seven biggest publicly traded Western energy companies, including Exxon Mobil Corp. and Royal Dutch Shell PLC, replaced just 75% of the oil and natural gas they pumped, on average, according to a Wall Street Journal analysis of company data. It was the biggest combined drop in inventory that companies have reported in at least a decade." For Exxon, 2015 marked the first time in more than two decades it didn't fully replace production with new reserves, according to the company. It reported replacing 67% of its 2015 output."

The Journal story is disturbing because it seems that the movement by big oil to not replace reserves means that we are laying the groundwork for a price spike in the future. When oil companies fail to replace reserves, they almost always over compensate for short term drop in oil prices. What is more, it is beginning to look more likely that in the foreseeable future we will see an even larger drop in oil company's reserves. The drain game has begun and more than likely it will continue. 

The USA Today reported that, "the depletion of old oil wells is expected to surpass new sources of supply in 2016, as the ongoing oil price slump puts a long list of oil projects on the shelf. Bloomberg flagged new data from the Norwegian consultancy firm Rystad Energy, which predicts that legacy production will tip the supply balance into the negative in 2016 for the first time in years. "The production from an average conventional oil field typically ramps up in the early years, plateaus and then enters a period of decline. Depletion rates vary wildly from field to field, but a rule of thumb for conventional oil fields - which make up the bulk of total global supply - is that they decline something like 6 percent per year on average. Again, those depletion rates can differ depending on location, levels of investment, etc., but one thing that is clear is that the oil industry needs to bring new oil fields online every year in order to merely keep production flat."
Energy estimates that the crash in oil prices has cut into upstream investment so severely that natural depletion rates will overwhelm the paltry new sources of supply in 2016. Existing fields will lose about 3.3 million barrels per day (mb/d) in production this year, while new fields brought online will only add 3 mb/d. This does not take into account rising oil demand, which will soak up most of the excess supply by the end of the year.

But the 3 mb/d of new supply in 2016 will mostly come from large offshore projects that were planned years ago, investments that were made before oil prices started crashing. The EIA sees four offshore projects starting up in 2016 - projects from Shell, Noble Energy, Anadarko, and Freeport McMoran - plus two more in 2017. The industry completed eight projects in the Gulf in 2015. U.S. Gulf of Mexico production will climb from 1.63 mb/d in 2016 to 1.91 mb/d by the end of 2017.

This comes as the U.S. rig count resumes its plunge. Baker Hughes reported that the oil rig count fell 15 to 372 this week the lowest total since the week of November 13, 2009. Oil last week fell after Baker Hughes report that we broke the 13th week of lower rigs. Now the big drop is another sign that U.S. oil output will slow.

Long term there is a seismic change in the future production outlook. Historically this has always led to higher prices down the road. This is the time to put on long-term hedges and lock in what could be close to the lowest prices we may see for decades. 


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CoffeeCoffee

Nearby Futures barchart.com


International Coffee Organization February 2016 Coffee Market Report
 
The coffee market stabilised slightly in February, but prices remain at very low levels. A lack of news regarding fundamentals with expectations of a large 2016/17 crop in Brazil have kept prices from maintaining any significant rally. Inventories in importing countries have been well replenished, giving a buffer against any immediate supply concerns. Finally, our initial estimate of world consumption in 2015 suggests a steady increase to 152.1 million bags, up from 150.3 million in 2014.




The monthly average of the ICO composite indicator settled 0.8% higher in February on 111.75 cents/lb, but daily prices finished the month weakly on 110.07 cents. The three Arabica group indicators all averaged higher compared to last month, but Robustas fell for the fourth consecutive month to their lowest level since May 2010.


The arbitrage between New York and London was mostly unchanged compared to January, but the differentials between the three Arabica groups and the Robusta indicator all increased. Furthermore, the differentials between the Arabica groups and the New York futures price have all been increasing recently, suggesting a potential for price increases that has not yet been observed in the futures markets. 



Total exports in January 2016 came to 9 million bags, just 0.8% less than January 2015, although total exports for the first four months of the coffee year (October to January) are up 1.7% on 35.9 million bags. Exports from Brazil have started to slow, with January shipments down 10.2% compared to last year, suggesting that stockpiles might finally be wearing thin, although this is still a significant volume of coffee. Exports from Vietnam, on the other hand, are estimated up by 10.1% to 2.3 million bags. Colombia continues to export higher volumes, with production levels for the first third of the crop year already on 5.3 million bags.

Looking ahead, there are increasing reports that dry weather resulting from El Niño could potentially affect production in Vietnam, Indonesia and Colombia over the next few months, although any deficit could likely be covered by the increase in output expected from Brazil and Central America.

Furthermore, inventories in importing countries have been replenished, with the European Coffee Federation reporting green coffee stocks of 11.9 million bags in December 2015, up from 11.5 million the previous year. The US Green Coffee Association also reported an increase from 5.5 million bags to 5.8 million, which gives roasters a decent buffer against any short-term supply concerns.

Our initial estimate of world coffee consumption in calendar year 2015 comes to 152.1 million bags, up from 150.3 million in 2014, but a slightly more modest increase than in recent years. The average annual growth rate over the last four years remains at a healthy 2%. Demand in the world's largest consumer, the European Union, has stagnated slightly at an estimated 42 million bags, averaging growth of 0.8% per year since 2012, but the USA continues to show an increased appetite for coffee, increasing by an average rate of 3.2% to an estimated 24.4 million bags. Japan also continues to expand, averaging 2.4% growth to 7.6 million bags. As a result, total consumption in all importing countries is estimated at 104.9 million bags.

Exporting countries have generally shown more dynamic demand patterns in recent years, and this trend has continued in 2015. Consumption growth in Brazil has slowed to an average of 0.5%, but remains high on 20.5 million bags. Much of the recent growth has come from Asia, with Indonesia, the Philippines, India and Thailand all growing at between 4.5 and 9%. Total consumption in exporting countries is therefore estimated at 47.3 million bags, at an average annual growth rate of 2.3% over the last four years.





CornCorn

Nearby Futures barchart.com

March 17, 2016 (AgWevb.com) By Alison Rice

Analysts Release Acreage Estimates 

As the grain markets and farmers alike await the March 31 Planting Intentions report from USDA, analysts' acreage estimates are starting to emerge.

Allendale this week released its forecast for planted acres in 2016, based on its survey of producers in 25 states. Its prediction? That farmers will plant more acres of corn, just slightly fewer acres of soybeans, and less wheat this year.
Here are Allendale's numbers:
  • Corn: 90.431 million planted acres versus USDA's forecast of 90 million acres.
  • Soybeans: 82.575 million acres versus USDA's forecast of 82.5 million acres.
  • Wheat: 51.769 million acres versus USDA's forecast of 51 million acres.
"We are saying an increase over last year, mainly because we have more acres available," said Rich Nelson, chief market strategist at Allendale. "A full 5.4 million acres will be added into the total planting mix for this year. That comes from prevented plant, CRP and those lower winter wheat acres."

What's motivating this shift? Despite corn futures below $4, many producers still see corn as a better bet than soybeans this year.

"Current prices, as of writing, continue to favor corn plantings over soybean plantings on a projected return above operating cost basis," wrote Christopher Narayanan, head of agricultural commodities research at Societe Generale in New York.

He expects farmers to plant the following in 2016.
  • Corn: 89 million acres.
  • Soybeans: 81.9 million acres.
  • Wheat: 51 million acres.
Narayanan also sees planting season weather playing a role in those decisions. "With current weather generally favorable and suggesting an early spring, we could see further acreage shifts from soybeans to corn," he wrote. "This could help to tighten the projected U.S. balances a bit further, providing some support to (soybean) prices."

What about corn prices? It could all come down to weather. "The next catalyst to corn prices will be the condition of the U.S. growing season and the corn crops as it develops," wrote Narayanan. "As elementary as that sounds, only a significant deviation from current supply and demand forecasts-likely supply-will drastically alter prices one way or another."

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OrangeOrange Juice

Nearby Futures barchart.com
March 9, 2016 (TheLedger.com) by Kevin Bouffard 

Florida orange growers see slightly bigger crop
WINTER HAVEN - At a time when morale among Florida citrus growers had fallen probably to an historic low, a ray of sunshine peaked through Wednesday.

"The light at the end of the tunnel is brighter," said Mark Hudson, head of the U.S. Department of Agriculture's Florida Field Office in Maitland.

Hudson spoke after delivering the welcome news that the projected 2015-16 Florida orange crop has grown by 2 million boxes, up to 71 million boxes.

While a 3 percent increase from USDA's February forecast may seem modest, it came after a relentless downsizing of the state's orange crop this season and over the previous three seasons because of the impact of the fatal disease citrus greening. This season's orange crop has fallen from 140.7 million boxes harvested in 2011-12. It opened the 2015-16 season at 80 million boxes in October and fell to 69 million in December.

The entire increase came in the harvest of Valencia oranges that began within the past weeks and will run to June. The current Valencia forecast is 35 million boxes compared to the final estimate of 36 million boxes of early and mid-season oranges harvested since October.

"We need a good Valencia crop; we need it desperately," said Vic Story Jr., a Lake Wales grower who will be inducted into the Florida Citrus Hall of Fame on Friday. "Overall today is good news."

The USDA also increased the projected 2015-16 Florida grapefruit crop by 2 percent to 10.7 million boxes, up 200,000 boxes from February, while holding the nearly completed tangelo forecast at 400,000 boxes. It reduced the projected 2015-16 tangerine crop by 100,000 boxes, or 7 percent, to 1.4 million boxes.

The crop increase came after the USDA monthly survey found Valencia oranges are slightly larger than projected earlier, meaning fewer fruit is needed to fill a box, while pre-harvest drop had diminished significantly, Hudson said. The projected drop fell to 36 percent, down from 40 percent in February.

He and other area growers have seen the same improvement, Story said.
"I'm not surprised by the estimate. We thought all along they were a little high on the drop rate," he said. "We're doing much better on Valencias so far this year compared to last year."

In his Valencia groves already picked, this season's harvest has increased as much as 20 percent compared to last season, Story said. That compares to declines ranging from 5 percent to 20 percent in early-mid groves picked earlier this season.

"A Valencia is just a stronger tree. Overall, I think, Valencias are handling greening better."

Greening is a bacterial disease that has spread to virtually every commercial citrus grove in Florida since its initial discovery in 2005. The disease weakens trees, resulting in smaller fruit and higher pre-harvest drop, before it kills the plant.
The Florida citrus crop has declined by about 70 percent over the past 10 seasons since greening's arrival.

Story and Tom Spreen, emeritus professor of agricultural economics at the University of Florida, agreed the change in the crop estimate will have little or no effect on the farm prices growers are getting for this season's fruit. That's because growers have already made contracts to sell this season's fruit to juice processors, who buy 95 percent of the state's orange harvest and about 60 percent of its grapefruit.

"I don't see that 2 million boxes would have much effect on (farm) price," Spreen said.

The economist hedged on his prediction that it will hold only if processors continue to see significant declines in retail sales. That would boost juice inventories processors hold and push down farm prices late in the season, a phenomenon that occurred in recent seasons.

From the start of the citrus season on Oct. 1 through Feb. 20, orange juice sales at major U.S. supermarkets have declined 4.7 percent while grapefruit juice sales fell 4.5 percent, according to the most recent report from the Florida Department of Citrus in Bartow.

But processors' inventories have dropped as much as 29 percent through Feb. 20, Spreen said.

If that holds, average 2015-16 farm prices should hold at current levels - $2.12 per pound solids for early-mids and $2.25 for Valencias, he said. Processors pay growers based on pound solids, a standard measure of the amount of juice squeezed from fruit.
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WheatWheat

Nearby Futures barchart.com
March 22, 2016 (AP.ORG) By ROXANA HEGEMAN

Europe's Mild Winter Puts Wheat on Track for another Big Harvest

European wheat crops may be heading for another big harvest after a mild winter sped up plant growth and left fields in good condition.

Crops are about two weeks ahead of normal pace in France and are in mostly good condition in Germany and the U.K. after escaping damage from cold this winter. As long as weather doesn't damage plants in the coming months, the speedy progress may signal an early start to harvests. Prospects are "promising" for developing crops this year, the European Union said on Monday.

Another bumper European wheat harvest would add to grain oversupplies following a surge in production across much of the Northern Hemisphere in the last two seasons. Wheat prices are near five-year lows in the U.S., France and Russia, cutting profits for farmers and eroding revenue for companies including equipment manufacturer Deere & Co. and fertilizer supplier Dow Chemical Co.

"The signs right now for European crops are quite good," Stefan Vogel, head of agricultural commodities research at Rabobank International, said by phone last week from London. "The forecasts don't call for any severe frosts. There could still be something happening in April, but in general, it looks right now like a lot of the crops are in pretty good condition."

High Inventories

The European Commission forecasts wheat stockpiles will reach an eight-year high in mid-2017 amid sluggish export demand. It expects the bloc's next soft-wheat harvest to fall 5.5 percent to 142.4 million metric tons, after previous crops benefited from large yields and an expanded area.

Crops are generally in "good shape" after fewer frosts than normal in February and March, while moisture remained ample, the EU's Monitoring Agricultural Resources unit said in a report on Monday.

In France, the EU's top wheat grower, 92 percent of crops were in good or very good condition as of March 14, according to FranceAgriMer. Almost half of soft wheat had developed 1 centimeter (0.4 inch) of grain ears, the stage that indicates the start of spring growth, compared with 17 percent by the same time last year.

German grain and rapeseed crops survived winter without significant damage after snow helped protect dormant plants from cold in January, according to Berlin-based farmers group DRV. Virtually all U.K. wheat is expected to survive winter, crop consultant ADAS U.K. estimates.

Early Harvest

Romania's harvest may also start early, said Viktor Korobko, director general of Veles-Agro Brokers, a Ukrainian brokerage company that recently expanded into Romania. While photos suggest plants are in good condition, farmers say yields may be slightly lower than last year, he said.

Polish crops haven't fared so well, with about 10 percent of wheat in the EU's fourth-biggest grower damaged from a January freeze, Jakub Olipra, an economist at Credit Agricole Bank Polska in Warsaw, said in an e-mailed note. Farmers are replanting damaged fields with spring varieties, which tend to yield less, Olipra said.

European farmers normally start collecting winter wheat in June and July. A harvest a week or 10 days ahead of normal may create a storage crunch for farmers who still have grain to sell from the previous season, said Antoine Liagre, an analyst at French farm adviser Offre & Demande Agricole. While colder temperatures in recent weeks slowed growth a bit, most fields remain ahead of the normal development pace, he said.

"Conditions in April, May and June will be the determinant for final yields," Liagre said. "Generally the crops are in good condition and advanced. Last year we had something similar, and we had exceptional yields."
 

OTHER COMMODITIES
DairyDairy Products
© Brian Gould, Agricultural and Applied Economics, UW Madison

MADISON, WI March 25, 2016 (REPORT 12)

 

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Butter Highlights
© Brian Gould, Agricultural and Applied Economics, UW Madison

MADISON, WI March 25, 2016 (REPORT 12)
 
BUTTER HIGHLIGHTS:  
   
Butter production is seasonally active throughout the country as heavy cream volumes continue clearing into butter churning. Some butter manufacturers are running at full capacity. With the passing of the early spring holidays, seasonal butter requests from retailers and food service are slowing down. At this point, production is mostly focused on bulk butter. Inventories are steady to building into cold storage. Bulk butter prices in all regions are ranging from 5 cents under market to 8 cents over the CME Group price, with various time frames and averages used.The NASS Cold Storage report noted U.S. butter stocks on February 29 were 235.5 million pounds, up 32% from a year ago and 23% higher than last month. Thursday at the CME Group, Grade AA butter closed at $1.9225, down 1.75 cents from last Thursday.
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Cheese Highlights
© Brian Gould, Agricultural and Applied Economics, UW Madison

MADISON, WI March 25, 2016 (REPORT 12)
 
CHEESE HIGHLIGHTS:  
 
Cheese production is steady and active across most of the country. Midwestern and northeastern cheese manufacturers are running full production schedules to handle current milk intakes. Western processors report very active cheese production. Some additional milk is being diverted into cheese vats as educational institutions go on spring break. Although cheese makers still report relatively good retail demand for cheese, buyers are wary about making purchases beyond near term needs. Some end users have fuller storage facilities and are watching price movements closely. Many industry contacts perceive cheese inventories are long and growing. According to the NASS Cold Storage report, U.S. stocks of total natural cheese at the end of February 2016 were 1.182 billion pounds, unchanged from the end of January 2016 and up 11% from the end of February 2015. In CME Group trading Thursday, barrels closed at $1.4500, down $0.0500 from last Friday and blocks closed at $1.4900, unchanged from last Friday. The CME Group cash trading is closed Friday, March 25, 2016, for the holiday weekend.


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polyPolypropylene
   
          Copyright © 2016 The Plastics Exchange. LLC. 
 
March 18, 2016 (Chicago, IL) The Plastics Exchange

 
Polypropylene demand was solid and prices rose at least a penny. Continuing the trend, spot buying interest was seen from processors seeking imported resin to augment their traditional domestic sup-ply, which has largely become insufficient. This supply/demand imbalance has helped producers se-cure the remainder of their $.06/lb margin enhancing price increase, with another $.03/lb on the table for April.

Other processors have returned to the spot market in search of well-priced offgrade Polypropylene to counter rising Prime prices. While falling Propylene monomer costs in Jan/Feb offset $.02/lb of the aforementioned increase, monomer costs have begun to recover and are now adding to the PP mar-ket's upward pressure.

A PGP cost push increase of $.015/lb has hit March contracts, and with spot PGP still relatively strong, all signs are pointing to higher PP prices come April.




KingThe King Nut Report

 
March 28, 2016 (Solon, OH) King Nut 

ALMONDS - The Almond market continues to be soft with spot pricing down to a level not seen since early 2010.  Many believe the market is nearing its bottom and will start to rebound.  This year's bloom is complete.  Most accounts rate the bloom as average to good throughout the state.  Although California received substantial amounts of rain and snow this winter, it was only slightly above historical averages.  Even so, it is welcome news after being so far below average last year.  The Almond season is off to a good start, though the summer heat will be a major factor in the development and final yield of the crop. 
 
CASHEWS - The Cashew market has heated up in the past several weeks.  Spot prices on most grades have risen $0.10-$0.15 per pound.  Some industry members believe this is a short-term reaction based on speculation in foreign markets and that the increased price will be short-lived.
 
PEANUTS - The Peanut market continues to be relatively stable.  Reported planting intentions for this coming season are similar to last year.  The biggest factors going forward will be actual plantings and rainfall through the summer.
 
PECANS - Last year's smaller than expected Pecan crop combined with consistent demand has continued to press the market upward, now reaching near levels last experienced in 2010.  All the broken grades are in short supply going forward.  Indications are that the market will remain strong throughout the year.


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OTHER NEWS
HotHot Topics
March 3, 2016 (nationalpeanutboard.org)
March is National Peanut Month
Celebrate with these nutty facts about peanuts 

  • Americans eat peanuts more often than any other nut.
  • It takes about 540 peanuts to make a 12-ounce jar of peanut butter.
  • Peanuts are sometimes called "ground nuts" or "ground peas" because peanuts grow underground.
  • Astronaut Alan Shepard brought a peanut with him to the moon.
  • The average peanut farm is 100 acres.
  • By law, any product labeled "peanut butter" in the United States must be at least 90 percent peanuts.
  • Two peanut farmers have been elected president of the USA - Thomas Jefferson and Jimmy Carter.
  • There are six cities in the U.S. named Peanut: Peanut, California; Lower Peanut, Pennsylvania; Upper Peanut, Pennsylvania; Peanut, Pennsylvania; Peanut, Tennessee; and Peanut, West Virginia. 
  • There's actually a word for the fear of peanut butter sticking to the roof of your mouth: arachibutyrophobia.  Isn't language fun!
  • Peanuts contain more energy-boosting protein than any other nut and have more than 30 vitamins and nutrients, making them a Superfood. 
  • The Huffington Post (Sept. 2014) asked, "What makes the best peanut butter and jelly sandwich? "Good question," we say! Results show, 36 % say strawberry jam is favorite (grape is 31%); favorite bread is white bread (54%); favorite type of peanut butter is smooth (56%) and a whopping 80 % like their PB & J with the crust left on the sandwich.
  • Each serving of peanuts contains 7 grams of plant-based protein.
  • Former President Bill Clinton says one of his favorite sandwiches is peanut butter and banana; also reported to have been the favorite of Elvis "the King" Presley.
  • There are four types of peanuts: runner peanuts, Virginia or "ballpark" peanuts, Spanish peanuts and Valencia peanuts.  Runner peanuts account for 80% of the peanuts grown in the U.S.
  • According to Little Brownie Bakers, the cookie bakers use about 230,000 pounds of peanut butter per week to bake Do-si-dos and Tagalongs.
  • It takes just five gallons of water to produce an ounce of peanuts, compared to 80 gallons for an ounce of almonds.
  • Surveys show women and children prefer creamy peanut butter, while most men opt for chunky.
  • Peanut butter cream is deposited onto Do-si-dos at the rate of 2,800 cookies per minute.
  • Unlike most plants, the peanut plant flowers above the ground but fruits below the ground.
  • People living on the East Coast prefer creamy peanut butter, while those on the West Coast prefer the crunchy style.
  • "Boiled peanuts" are considered a delicacy in the peanut growing areas of the South. Freshly harvested peanuts are boiled in supersaturated salt water until they are of a soft bean-like texture. They are most frequently enjoyed at the end of the day with a favorite beverage.
  • Goober-a nickname for peanuts-comes from "nguba", the Congo language name for peanut.
  • Half of consumers eat peanut butter at least once per week.
  • Georgia is the leading peanut-producing state in the U.S.
  • George Washington Carver discovered over 300 uses for peanuts, including chili sauce, shampoo, shaving cream and glue.  Contrary to popular belief, however, he did not invent peanut butter.  The earliest reference to peanut butter can be traced back to the Ancient Incas and the Aztecs.
  • Despite the name, peanuts aren't nuts.  They're legumes!


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