Global feed market: Russia and Ukraine are worried about the situation, ethanol profits have fallen, and feed grains have risen and fallen

 

On Friday, May 2022 corn futures on the Chicago Board of Trade (CBOT) settled at around 652.
75 cents a bushel, up 2.
25 cents, or 0.
35%, from a week ago
.
U.
S.
Gulf No.
2 yellow corn was quoted at 744.
75 cents a bushel, down 3.
75 cents, or 0.
5 percent, from a week ago
.
March 2022 corn futures on the EURONEXT exchange settled at around €254/tonne, down €1 or 0.
4% from a week ago
.
The FOB spot price of Argentine corn in Shanghe was $288/ton, up $2 or 0.
7% from a week ago
.
The May 2022 corn futures on the Dalian Commodity Exchange closed at about 2,775 yuan/ton, down 1 yuan from a week ago
.

 

　　This week, international crude oil futures went up and down each other
.
The March West Texas Intermediate (WTI) contract on the New York Mercantile Exchange (NYMEX) settled at $91.
07 a barrel, down 1.
7% from a week ago, failing to extend the previous seven-week winning streak
.
Brent crude futures for April delivery, the global benchmark, settled at $93.
54 a barrel, up 0.
9% from a week earlier and marking an eighth straight weekly gain
.
Crude oil futures were under pressure as progress in talks over the Iran nuclear deal could lead to the lifting of U.
S.
sanctions on Iran's crude exports, improving the outlook for global crude supplies
.
However, the continued tense crisis in Russia and Ukraine may lead to interruption of Russia's energy supply, and the production of major oil-producing countries is difficult to keep up with the pace of demand recovery, which will continue to support oil prices
.
After rising by more than 50% last year, crude oil prices have risen by more than 20% this year, and many investment banks expect crude oil prices to reach and exceed $100 per barrel this year
.

 

　　Grain markets continue to pay close attention to the geopolitical situation in Russia and Ukraine

 

　　Tensions between Russia and Ukraine have supported grain prices, including corn, over the past week on concerns that escalating geopolitical tensions in the Black Sea region could disrupt grain trade flows at Ukrainian Black Sea ports
.
Ukraine is the world's leading corn exporter
.

 

　　So far, however, the pace of Ukrainian corn exports has remained strong
.
In early February, Ukraine exported about 1.
5 million tons of corn, much higher than the 821,000 tons in the same period last year, of which exports to China accounted for 27%
.
So far in 2021/22, between July 1, 2021, and February 10, 2022, Ukrainian corn exports reached 17.
63 million tons, up from 12.
22 million tons in the same period last year
.
China was the number one export destination (5.
42 million tons)
.
In addition, 14 cargo ships will call at Ukrainian ports from February 11 to 19
.
The ships will carry 2.
31 million tonnes of corn, a third of which will be destined for China
.

 

　　U.
S.
ethanol processing profits fall

 

　　The recent decline in U.
S.
ethanol prices and the rise in corn prices have led to a rapid decline in ethanol processing rates
.
For many producers, the return on investment in ethanol production is already lower than the cost of production, according to research from Iowa State University
.

 

　　Figure 1: Schematic diagram of ethanol production costs and returns in the U.
S.
Midwest

 

　　The operating cost-benefit metric (red) in the figure is a measure of the profitability of ethanol production, calculated by subtracting variable production inputs (corn, gas, and other costs such as enzymes, labor, electricity and water)
.
The metrics used in the calculations are that 1 bush of corn and 72,800 Btu of natural gas can produce 2.
8 gallons of denatured ethanol, 17 pounds of distillers grains and 0.
7 pounds of corn oil
.
Other production costs include extraction costs of $0.
30 per gallon of ethanol and $0.
05 per pound of corn oil
.
It is important to point out that even positive operating earnings do not necessarily mean profitable, as there are other costs to consider, such as plant financing costs
.
The horizontal line in the graph ($0.
25 per gallon) is considered the break-even point, the break-even line that takes into account the cost of capital and other fixed costs
.
Profits are only meant when operating earnings exceed the horizon
.

 

　　South American corn production forecast lowered

 

　　The International Grains Council (IGC) on Thursday lowered its forecast for 2021/22 global corn production by 4 million tons to 1.
203 billion tons, partly due to bad weather in South America, with Brazil's corn output down from an earlier forecast of 112.
9 million tons.
Argentine corn production was lowered to 59 million from an earlier forecast of 61 million at 111.
5 million
.

 

　　The hot and dry weather in South America since December has had a greater impact on soybeans than corn, because the most affected is the first-season corn, and the second-season corn, which accounts for 75% of Brazil's corn production, is still being planted.
The peak harvest period will not be reached until June
.
As of February 12, Brazil's second-season corn planting progress reached 35.
1%, much higher than the 10.
2% in the same period last year
.

 

　　With the overall reduction in South American corn production, this means that Ukrainian corn exports will need to reach a record 33 to 34 million tons to fill the South American gap
.
However, unfavorable weather in South America has led to an expected decline in Argentina's corn production, which means that Brazil's second-crop corn production cannot be missed.
Otherwise, the global corn supply may be extremely tight before the new US corn crop is harvested in September
.
The competition for spring planting in the northern hemisphere is even more striking
.

 

　　U.
S.
spring planting competition eye-catching

 

　　What makes this year different from previous years is that both grain and oilseed prices have hit multi-year highs, while high fertilizer prices and high costs of other production inputs have also created uncertainty in planting decisions
.
The price ratio of November soybeans to December corn was 2.
449, based on Friday's close, which typically encourages farmers to plant soybeans rather than corn, especially as fertilizer costs soar
.
Corn is a fertilizer-intensive crop, and soybean cultivation requires far less fertilizer than corn
.
At the end of January, consulting firm Aisin Huamai estimated that the 2022 U.
S.
corn planting area would be 91.
489 million acres, down 89,000 acres from its December forecast and 1.
868 million acres less than in 2021
.
Some analysts even believe that corn plantings could fall by as much as 3 million acres
.
However, ADM expects U.
S.
farmers to plant 93 million acres of corn and 87 million acres of soybeans in 2022
.