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The market was quiet with little action reported

Posted on Jun 20, 2017 in Animal Fats & Oils

The market was quiet today with little action reported. From the sell side, light cattle weights are keeping tallow supplies tight and there have not been an reports of spot material openly offered, formulas offerings are similarly quiet. Sources reported that buyers aren’t showing much interest either due to some weakness at the CME today. DCO trading was reported out of the Illinois market in a range of $0.2825 – 0.2925 FOB this afternoon.

Weekly Review

As a whole, the market was fairly steady last week. Taking a straight average of all of the weekly averages, the change was 11/100ths of a cent higher. The commodities that saw moves greater than 1/10th of a cent were choice white grease and soybean oil.

Trucks of CWG traded as high as $0.2850 last week, narrowing the spread to the $0.3200 Chicago rail market. Sources had reported numbers into biodiesel over the $0.3000 mark and demand into the feed sector has been reported as consistent.

After a few weeks of heavy spot action, the tallow market took a breather. Sources reported formula based business for the second half of July, but stopped short of quantifying “good” and “strong” volume. The BFT market appears to be well sold for most of July.

Buyers in the biodiesel sector have reported a shift towards more veg oils. BFT prices have jumped 18.6% since the week ending April 7, while bean oil values have risen 2.7%, bouncing around in a range of mid $0.31’s to mid $0.32’s. Sources have reported bean oil delivered into Midwestern plants in the neighborhood of $0.3300, which is a much better value than nearly all grades of tallow as well as choice white.

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Figure 2.

Please contact Ryan Standard at 563.223.9021 or ryan@thejacobsen.com with any questions, comments or trading.

Today Last Week Last Year WTD
Broiler Slaughter 33,529,000 32,701,000 31,822,000 33,529,000
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EMTS data showing a much-needed surge in D4 production

Posted on Jun 19, 2017 in Biodiesel, Vegetable Oil, and Grain

Despite the latest EMTS data showing a much needed surge in D4 production, B17 RIN’s had their best weekly showing since the first week of May.  B17 RIN values climbed a robust 6 cents for the week, closing at 110.  Intraday, the B17 RIN traded up to 113 before momentum subsided and bids fell back to 109.  The B17’s closed at their highest level since December 21, 2016.  Ethanol RINs did not follow or lead in this rally.  E17’s finished the day down about a penny, but up nearly two cents for the week.  The B17/E17 spread is 34 cents wide, expanding by 4 cents this week on the strength of the bio RIN.

Rising soybean oil prices and stagnant heating oil values are making blend margins disappear.  The BOHO increased 6½ cents this week to $1.01 per gallon.  Like the B17 RIN, this is the BOHO’s highest reading since December 21, 2016. Soybean oil prices climbed 2.54% to 33.11 cents per pound, while heating oil values increased 4 tenths of a cent.

The LCFS credit continues to quietly rally.  Bids climbed to $80 with offers resting two dollars higher at $82.  For the week, the credit is up $10.  This provides a nice boost for UCO based biodiesel producers in and out of California that supply biodiesel to that market.  The average price per gallon for the UCO based credit moved from 71cents to 81 cents.

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Weekly LCFS Credit Trading

The volume of LCFS credits that traded during the week ending June 11th was up noticeably from the week prior.  Per California’s Air Resource board (CARB), 91,800 credits traded between June 5th and the 11th. Average weekly credit volume for 2017 increased from 91,769 credits to 91,771.  Market activity has been subdued, but is beginning to stir after several quiet weeks.  Current credit trading remains well below the 121,567-average covering the second half of 2016.

Weekly data shows that credit prices are beginning to push higher and the trading range is expanding.  Over the past week, credits traded between $69.00 to $98.00, with the average price being $76.29 per credit. There were 12 transfers recorded during the week, 10 more than the number recorded during the prior week and 1 less than the 2017 weekly average of 13 transfers per week. During the prior week, credits traded between $69.50 and $74.00, at an average price of $73.36.

The average credit trading price agrees with what outside brokers have been indicating the market to be. CARB’s weekly report excludes 9 transfer totaling 29,800 credits because they were reported at zero or near-zero dollar prices.  CARB only includes transfers that were completed in the given week.  Any transfers proposed and still pending confirmation are excluded.

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May 2017 Biomass-based diesel production surges 26%

Biodiesel/Renewable diesel production shifted into a higher gear during May.  According to the latest EMTS data, 231.11 million biomass-based diesel gallons were produced.  This is the 6th highest monthly production rate on record and up 26.35% from the revised monthly total of 182.92 million gallons in April.  May 2017 production is 12.23% more than what was produced during May of 2016.  Year to date, 862.98 million D4 gallons have been produced, which is 37.69 million more gallons than what was produced Jan to May of 2016. The current average production rate through May has the industry back on track to achieve the D4 mandate.

If the industry were to continue to produce/blend at the rate seen in May, there would be 2.48 billion gallons and 3.82 billion RINs consumed.  This would bring production close to the pace necessary to satisfy both the D4 and unspecified portion of the D5 mandate without having to dip heavily into the RIN bank.

44% of the D4 mandate (based on RINs) is satisfied. However, only 6% of the unspecified portion of the D5 mandate has been filled. 162.4 million gallons per month of D4 production would complete the D4 mandate.  Another 86 million gallons per month could be necessary to fulfill the unspecified portion of the D5 mandate. Combined production needed to satisfy both mandates is 248.42 million gallons per month.    Of course, that only holds true if the EPA’s estimated gasoline and diesel consumption figures prove to be on target.  The latest STEO estimates indicate that they are low, which means obligated parties are likely going to need to purchase more RINs than indicated by the published RVO’s, or withdraw RINs from the RIN bank in order to comply.

The D4 category is a combination of both biodiesel and renewable diesel production. The increase in May production was fairly uniform between the two D4 categories.  Renewable diesel output ramped 27.4.2% higher, increasing from 34.1 million gallons’ l to 43.5 million. Biodiesel production moved 26% higher to 187.6 million gallons. Biodiesel represents 81% of D4 production and renewable diesel accounts for 19%.  As stated earlier, total D4 production is 37.69 million gallons more than what was produced over the same period in 2016.  Interestingly, 37.06 million of that increase is comes from the renewable diesel industry.

Domestic production has accounted for 618.61 million of the 862.98 million D4 gallons produced in 2017.  244.36 million gallons were received as imports.  During May, it is estimated that 50.4 million biodiesel gallons and 11.9 million renewable diesel gallons were imported.

The EPA revised the April production totals higher, adding 2,290,008 RINs and 1,526,672 gallons to the D4 totals. During May, domestic production accounted for 263.95 million RINs, importers contributed 58.55 million and 35.44 million RINs were from foreign production. Month over month, domestic RIN production was up 44.68 million, importers increased 20.50 million, and foreign production increased by 5.40 million RINs.

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INDUSTRY-RELATED NEWS


June 9 (National Law Review) Department Of Commerce Postpones Preliminary Determinations For Biodiesel AD/CVD Investigation – On June 5, 2017, the U.S. Department of Commerce’s (DOC) International Trade Administration (ITA) announced in the Federal Register that the preliminary determination in the antidumping (AD) and countervailing duty (CVD) investigations on biodiesel from Argentina and Indonesia will be postponed.  The preliminary determination will be due by August 21, 2017, and the final determination will be due within 75 days of the issuance of the preliminary determination.  Pursuant to Section 703(b)(1) of the Tariff Act of 1930, a preliminary determination is due within 65 days of the initiation of a CVD investigation unless DOC receives a request to postpone the determination from a petitioner, which DOC received on May 22, 2017.  The notice states that the petition was granted since there was no compelling reason to deny the request. READ MORE

May 31 (Biofuels International)  Neste renewable diesel sees Finnish consumers save 560 round the world flights worth of emissions –  Finnish consumers have already reduced emissions by an amount equal to 560 flights around the world, using Neste MY Renewable Diesel. This is despite the fuel only being released at the start of the year.  Neste MY Renewable Diesel is produced 100% from waste and residues, and was launched into the Finnish market at the start of 2017. Using the fuel, Finnish consumers have reduced greenhouse gas emissions by more than 1.5 million kg. This figure is equal to the emissions caused by 560 round-the-world charter flights for one person, or the annual emissions of more than 500 private cars. READ MORE

May 20 (Inside Climate News)  Trump Budget Would Wallop EPA’s Climate and Environment Programs –  Details of President Donald Trump’s 2018 budget proposal, leaked this week, reveal that the administration appears determined to wallop environmental programs, including many that tackle climate change. It would cut Environmental Protection Agency funding by nearly one-third, slash spending on renewable energy innovation, and eliminate the Greenhouse Gas Reporting program, among other programs. READ MORE

 

 

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The soybean crush margin improved

Posted on Jun 19, 2017 in Uncategorized

Soybean Crush Central Illinois

The soybean crush margin improved as the price being paid for meal and oil held steady week over week, while the cost of soybeans declined. The value received from oil and meal sales, per bushel of soybeans crushed remained at $10.79 in Central IL. The cost of soybeans dropped from $9.39 to $9.32 per bushel, allowing the margin increase 7 cents. With the Estimated margin at $1.47, it has reached its highest level for the year.

NOPA’s most recent crush data shows that 149.246 million bushels were crushed during the month of May.  This exceeded analyst estimates that expected an average of 143.192 million bushels to be crushed. The crush increased 7.3% from April and was the second busiest crush for May on record. Year over year, the crush was 2.3% less than the 152.82 million bushels crushed during May of 2016. Meal exports of 595,468 tons, were 23% less than May of 2016.

Soybean oil stocks also moved higher, but were in line with expectations. Inventories increased 24 million pounds to 1.749 billion pounds in May.  This is up 1.4% from April but 12.3% less than the 1.994 billion pounds at the end of May 2016. Stocks recorded at the end of May 2016 were the highest on record for May.  Analyst had been forecasting stocks to increase to 1.745 billion pounds.

Cumulative bushels crushed by NOPA members during the 2016/17 season are 1.360 billion. The USDA is expecting the crush to be 1.910 billion bushels, which is 1.3% higher than last year’s crush total.  Through May, NOPA crush members have crushed 0.49% more soybeans than last season.   This lags USDA projections.

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NOPA May Crush Data

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USDA vs. NOPA April Crush Data

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Broiler slaughter is continuing along at a strong pace this year

Posted on Jun 19, 2017 in U.S. and International Animal Fats & Protein

Ruminant MBM traded steady out of the Mo. River market today with nine loads reported at $235. Trading elsewhere was quiet to wrap up the week with most looking ahead at next week.

Broiler slaughter is continuing along at a strong pace this year, up 1% compared to a year ago. The export market has been the major driver of price this year, pushing big volume out of the interior market. If those exports slow, whether by demand or perhaps increased competition from Europe, the lack of disappearance combined with heavier kills could explain the lower prices.

Figure 1.

The monthly broiler slaughter is shown as an average for 2009 – 2014 and 2015 – May 2017.

Please contact Ryan Standard at ryan@thejacobsen.com or 563.223.9021 with any questions, comments or trading.

Broiler-fryer slaughter under federal inspection for 16-Jun-17 and 17-Jun-17 is estimated to be 34,744,000 head up 1.62 percent from a week ago and up 4.4 percent from a year ago.(Last week 34,189,000, last year 33,264,000)

Weekly broiler-fryer slaughter under federal inspection for the week ending 17-Jun-17 is estimated to be 168,331,000 head up 2.09 percent from a week ago, and up 3.80 percent from a year ago.(Last week 164,892,000, last year 162,161,000)

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Estimated cattle slaughter was 628,000 – the second highest of the year

Posted on Jun 19, 2017 in Hide & Leather

Market Activity & Analysis

The hide market concluded the week with fewer hides traded than over the past several weeks, and likely, under the hides generated. Most of the business was done for steady money as buyers showed no interest in chasing prices any higher, claiming sluggish shoe leather business couldn’t justify any increases. The cow market continued to outperform steers on decent demand from upholstery and fairly stable auto leather.

Week-Ending Slaughter

The week’s estimated cattle slaughter was 628,000—the second highest of the year, coming in under 630,265 on April 27. The previous week’s kill was 622,000 and the same week last year it was 605,596. Year-to-date slaughter at 14,294,262 is up 5.7% from 2016.

Today’s Market

There were only four sales quoted today, including big packer BBS from $66 to $67 and HNS at $67.50.


Today’s Trades

Packer Sales

HNS 60 MIN @ $67.50 OR 0.8775
BBS 62/64 @ $67.00 OR 0.8300
BBS 62/64 @ $66.00 OR 0.8175

Processor Sales

BBS 62 MIN @ $63.00 OR 0.7925


June 3 (Week 21) Actual Cattle Slaughter by Classification

This USDA data is published every Thursday by the USDA Agricultural Marketing Service and reflects actual week-to-date cattle slaughter by classification for the week ending two weeks prior to document release day.


Livestock, Dairy, & Poultry Outlook

Cattle/Beef Summary

Third-quarter commercial beef production is expected to be 6.8 billion pounds, an increase of 5% from the same period last year. Beef production for 2017 is revised downward slightly at 26.2 billion pounds, but remains 4% above last year. Beef-trade forecasts for 2017 and 2018 are unchanged from last month. Prices for 1,100-1,300 pound Choice steers are expected to average $118-$124 per hundredweight (cwt) for the third quarter and $122-$126 per cwt for the year.

Dressed Weights Limit Beef Production on Higher Slaughter

Commercial beef production for April 2017 was fractionally below a year ago. However, with 1 less slaughter day in the month, meatpackers slaughtered 2%, or 54,000 head, more cattle than last year. According to the USDA/NASS Livestock Slaughter report released in May 2017, dressed weights for steers and heifers slaughtered under Federal inspection declined 25 and 22 pounds, respectively, year over year. The decrease in the average carcass weight more than offset the increase in the number of cattle slaughtered and kept production from increasing. The USDA report on beef production under Federal inspection for the week ending May 27 indicates that average dressed weights for steers and heifers continue to decline, falling another 9 and 13 pounds, respectively, from the week ending April 29. Weights are expected to move higher seasonally, but gains will likely be limited while there are incentives to market cattle as rapidly as possible.

Loads sold for delivery in 22 to 60 days averaged above year-earlier levels through mid-April. For meatpackers to meet their commitments as dressed weights decreased, they likely increased slaughter late in the month and into early May. According to the USDA weekly recap of the 5-Area weighted average fed steer price (LM_CT 150), the price experienced a spike in the first week of May to $144.60 per cwt. The demand by meatpackers likely contributed to that price surge. Relative price strength is likely to persist as demand for beef remains strong. However, as summer demand winds down, packer margins will likely decline and cattle prices will be pressured. Third-quarter fed prices are expected to decline seasonally, averaging $118-$124 per cwt, up from $113.26 in third-quarter 2016.

Retailer demand for featuring Choice beef at the start of the summer holidays widened the spread between wholesale prices for Choice and Select beef to historic levels at $30.38 per cwt in the week ending June 9. However, the spread typically reaches its seasonal peak around mid-June, as indicated in the chart below. As demand for grilling-type cuts diminishes and supplies of Choice beef increase seasonally, the spread is expected to decline through late summer.

Third-quarter production is forecast at 6.8 billion pounds, and USDA revised its 2017 commercial beef production down slightly to 26.2 billion pounds. For 2018, beef production was adjusted upward to 27.1 billion pounds on the expectation that more steers and heifers would be available for slaughter next year due to the higher forecast 2017 calf crop.

Feeder Cattle Supply Outside Feedlots Tightens

According to the May 2017 USDA/NASS Cattle on Feed report, year-over-year net placements increased by 12% to 1.78 million head during April, surpassing marketings that totaled 1.70 million head. The large placement number would imply proportionately greater steer and heifer marketings late in the third quarter or early in the fourth. The sharp increase in placements can be attributed to a few factors. First, producers reacted to the unexpected price increase for feeder calves by marketing their calves. Second, higher than normal wheat graze-out likely occurred in the Southern Plains as a result of very low wheat prices. Then those calves on wheat pastures were likely marketed in April, allowing for wheat producers to plant a summer crop. However, according to the ERS estimate of feeder cattle supplies outside feedlots, on April 1 there was only a 0.42% year-over-year increase in the supply of feeder cattle to be placed in feedlots. Large placements of calves during April would likely have further tightened the number of feeder calves available outside the feedlots.

Returns to feedlot operators improved during 2017 as bids for fed cattle moved higher through much of the year and feedlots were marketing calves bought at relatively low prices during the second half of 2016. With expectations of moderate feed prices, feedlots have shown a willingness to bid higher for feeder calves. Although feeder calf prices are expected to decline from their second-quarter peak, they will remain above year-earlier levels into early 2018.

Beef Exports Up, Imports Down Through April 2017

U.S. beef exports for April 2017 increased by 15% to 218 million pounds over the same month a year ago, which was supported by growth in four major destinations-Japan (+18%), South Korea (+8%), Hong Kong (+7%), and Canada (+4%). Increases in exports are likely fueled by higher domestic production and lower beef prices. The U.S. dollar has weakened slightly over the past 2 months relative to most of its trading partners, making it less expensive to buy U.S beef. Exports for the first 4 months of 2017 are also 20% higher than the same period last year, totaling 869 million pounds. Japan remained the number one export destination throughout this period.

In April 2017, U.S. beef imports totaled 250 million pounds, down 8% from the same month a year ago. U.S. beef imports from January through April 2017 totaled 950 million pounds, 11% lower than the same period last year. Increased imports from Canada and Mexico were outweighed by the heavier than expected decline in imports from Oceania through April 2017. Beef supplies remain tight in Australia as herd rebuilding appears to be continuing. As a result, the second-quarter 2017 import forecast was left unchanged, at 775 million pounds.

Cattle Imports Declined and Exports Increased Through April 2017

First-quarter 2017 cattle imports were 5% above the same period a year ago. April 2017 cattle imports were 153.9 thousand head, a 28% decline from the same month a year ago. Declines were seen in both Mexico (-20%) and Canada (-37%). These were the lowest April numbers since 2005. Lower imports during March and April have contributed to 4.5% lower cattle import numbers for the first 4 months of 2017 compared to the same period a year ago. Cattle imports so far this year have totaled 672 thousand head. At the same time, cattle exports increased to 44 thousand head for the first 4 months of 2017, 60% more than the same period a year ago. Higher shipments were made to both Canada and Mexico.

Link to complete USDA report:  LIVESTOCK, DAIRY, & POULTRY OUTLOOK


The International Market

China

This week, some of the major packers shortened the offer list. A few raised the asking price by US$1-2 per hide, but not many Chinese buyers are willing to follow a firm-up market to pay more than the last price. Several buyers did purchase, although for only limited volume to test water.

Many tanners claim leather demand remains disappointing. Also, since they have been buying hides for a number of weeks, they are not in much hurry to keep booking hides, especially when some packers are asking for more money. Except for CBS, all packer steer hide price on the offering list are already above or well above $70 C&F. It seems that both sides this week are feeling comfortable to just let the week go without much going on.

**Visit our International Hide & Leather Bulletin to see market news for additional countries across globe.**

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