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Market Matters Blog           01/17 10:29
DDG Prices Lower
2016 Transportation Review: US River System
China's Final Word on US DDGS Imports: Higher Tariff, Duties
2016 Transportation Review: Rail
Stored Corn Going From Good to Bad
Upper Mississippi River, Columbia-Snake River Close Until Spring 
Typecasting Markets
Forward Thinking: Time to Sell the Carry?
Eastern Corn Belt Imports North Dakota Corn
Can Grains Get Worse?

******************************************************************************
DDG Prices Lower

   The DTN average DDG spot price moved $5 lower from one week ago to $93 for 
the week ended Jan. 12. Price declines ranged from $2 to $20 per ton. Of the 39 
locations from which DTN collects spot prices, 25 bids were lower, 5 bids were 
higher and the balance of the prices were unchanged.

   On Jan. 10, China released a final ruling on U.S. distillers grains duties 
and tariffs following a year-long trade probe. Anti-dumping duties were set at 
a range from 42.2% to 53.7%, while anti-subsidy tariffs will be between 11.2% 
and 12%. The duties and tariffs apply to both distillers dried grains with and 
without solubles and will be in effect for five years starting Jan. 12, 2017. 
The preliminary penalties assessed in late September 2016 were an anti-dumping 
deposit of 33.8% and an anti-subsidy tariff of 10% to 10.7%. Merchandisers told 
DTN the market had expected the news, but some thought the final ruling was a 
bit harsh. A few noted prices have been helped a bit by good truck demand in 
the Midwest. However, Eastern Corn Belt locations with quality problems are 
trading $10-15 per below standard quality product. Remember, there is a 
vomitoxin issue in parts of the ECB and if tainted corn is put through the 
plant, it can affect the DDG allowable ranges for various animal feeds.

   CIF NOLA (New Orleans, Louisiana) DDGS prices for the week ended Jan. 12 
were 6 cents lower for January at $118. February/March prices were 2 to 4 cents 
lower at $112 to $128. Informa Economics reported that export data through 
November 2016 was down 9 percentage points compared to a year ago. "Exports to 
China were off by roughly two-thirds compared to the previous year, so some of 
the impact of tariffs has already influenced the market. The weakness in DDGS 
prices at container yards and the Gulf suggest that this is an opportunity to 
entice new export demand."

   The value of DDG relative to corn for the week ended Jan. 12 was lower at 
72.68% and the value of DDG relative to soybean meal was lower at 28.68%. The 
cost per unit of protein for DDG was lower at $3.72 compared to the cost per 
unit of protein for soybean meal which was higher at $6.83. The relative price 
of DDG to corn and meal futures is running below average and remains a good 
value for end users.


                                                       CURRENT        CURRENT
COMPANY             STATE                             1/12/2017       1/5/2017      CHANGE
Bartlett and Company, Kansas City, MO (816-753-6300)
                    Missouri            Dry             $120            $115          $5
                                        Modified         $60            $58           $2
CHS, Minneapolis, MN (800-769-1066)
                    Illinois            Dry             $100            $100          $0
                    Indiana             Dry              $90            $95          -$5
                    Iowa                Dry              $90            $98          -$8
                    Michigan            Dry              $75            $85          -$10
                    Minnesota           Dry              $85            $90          -$5
                    North Dakota        Dry              $95            $95           $0
                    New York            Dry             $105            $110         -$5
                    South Dakota        Dry              $90            $95          -$5
MGP Ingredients, Atchison, KS (800-255-0302 Ext. 5253)
                    Kansas              Dry             $110            $110          $0
POET Nutrition, Sioux Falls, SD (888-327-8799)
                    Indiana             Dry              $95            $90           $5
                    Iowa                Dry              $95            $100         -$5
                    Michigan            Dry              $95            $90           $5
                    Minnesota           Dry              $95            $100         -$5
                    Missouri            Dry             $100            $105         -$5
                    Ohio                Dry              $90            $90           $0
                    South Dakota        Dry              $98            $98           $0
United BioEnergy, Wichita, KS (316-616-3521)
                    Kansas              Dry             $105            $105          $0
                                        Wet              $40            $40           $0
                    Illinois            Dry              $95            $105         -$10
                    Nebraska            Dry             $105            $105          $0
                                        Wet              $40            $40           $0
U.S. Commodities, Minneapolis, MN (888-293-1640)
                    Illinois            Dry              $85            $95          -$10
                    Indiana             Dry              $80            $100         -$20
                    Iowa                Dry              $90            $100         -$10
                    Michigan            Dry              $80            $100         -$20
                    Minnesota           Dry              $85            $90          -$5
                    Nebraska            Dry             $100            $105         -$5
                    New York            Dry             $105            $125         -$20
                    North Dakota        Dry             $105            $105          $0
                    Ohio                Dry              $80            $100         -$20
                    South Dakota        Dry              $85            $90          -$5
                    Wisconsin           Dry              $90            $100         -$10
Valero Energy Corp., San Antonio, TX (402-932-5901)
                    Indiana             Dry              $85            $90          -$5
                    Iowa                Dry             $100            $95           $5
                    Minnesota           Dry              $92            $92           $0
                    Nebraska            Dry             $100            $105         -$5
                    Ohio                Dry              $95            $110         -$15
                    South Dakota        Dry              $90            $90           $0
                    California                          $156            $158         -$2
Western Milling, Goshen, California (559-302-1074)
                    California          Dry             $170            $175         -$5
*Prices listed per ton.
                    Weekly Average                       $93            $98          -$5
The weekly average prices above reflect only those companies DTN
collects spot prices from. States include: Missouri, Iowa, Nebraska,
Kansas, Illinois, Minnesota, North Dakota, South Dakota, Michigan,
Wisconsin and Indiana. Prices for Pennsylvania, New York and
California are not included in the averages.

   Mary Kennedy can be reached at mary.kennedy@dtn.com 

******************************************************************************
2016 Transportation Review: US River System

   Part two of this two-part column looks at the performance of commodity 
movement via barge on the U.S. waterways and challenges faced throughout the 
year.

   **

   The start to 2016 was disastrous for the entire river system, as heavy rains 
and melting snow from a massive winter storm in late December 2015 caused 
extensive flooding along the Mississippi River and its tributaries. The 
flooding plagued the entire U.S. river system for nearly the first 4 1/2 months 
of the year.

   By mid-January 2016, the glut of water from heavy rains and melting snow 
that caused extensive flooding along the Mississippi River in Missouri and 
southern Illinois made its way farther south toward the Gulf of Mexico. 

   The flooding caused delays, stoppages and slowdowns in New Orleans, wreaking 
havoc on the shipping industry in the Gulf. The high water from Vicksburg to 
New Orleans caused numerous navigation accidents and river closures, causing 
tow boats to be delayed making deliveries into New Orleans Port. As a 
consequence, tow boats got out of sync and stacked up on the southern part of 
the Lower Mississippi River. 

   In mid-February 2016, Tom Russell of Russell Marine Group told me, 
"Logistics on the river were still working through the wicked hangover left 
behind from the flooding."

   For much of March, Russell told me that the Southwest Pass in southeastern 
Louisiana at the mouth of the Mississippi River, still had draft restrictions 
in place for ocean vessels. "The continuous massive flow of water deposits a 
lot of sand/silt right where Mother Nature intended, at the mouth of the 
river." Draft sizes were raised from the norm of 45 feet to 41 to 43 feet until 
dredges were able to clear the areas that were affected. 

   As April approached, the river closed for eight days at Mile 30 to 44 in the 
Upper Mississippi after a 30-barge southbound tow collided with the Thebes 
Bridge, located just above Cairo, sinking two barges. In mid-May, rains in the 
Central Plains states and into the Midwest pushed some river levels up once 
again. "Safety protocols were in place for parts of the Illinois River, and the 
Lower Mississippi experienced a slight rise again to warrant some safety 
protocols put in place for the southern portion," said Russell. 

   By the end of June, Russell reported that rivers were in good shape and for 
the first time since November 2015, river levels in New Orleans had fallen 
below 10 feet above zero gauge.

   2016 BARGE TONNAGE HIGHER DESPITE ROUGH START TO YEAR

   In the northern tier of the Upper Mississippi River (UMR), the 2016 shipping 
season opened March 13 and ended Dec. 2. The northern section of the UMR starts 
in St. Paul, Minnesota, and runs downriver through Guttenberg, Iowa. The St. 
Paul District maintains a 9-foot navigation channel from Minneapolis to 
Guttenberg, Iowa. The U.S. Army Corps of Engineers (USACE) St. Paul District 
said in its 2016 shipping report that "keeping this system open is vital to the 
nation's economy." 

   Even with a shorter season than the rest of the river system, 2016 was a 
strong year for the UMR. The USACE reported that "Lock and Dam 10, near 
Guttenberg, Iowa, was above the 10-year average for combined lockages. The 
lockages supported 18,908,851 tons of commodities by the navigation industry. 
This is the highest amount since 2002. During the 2015 season, Corps staff 
supported 2,088 commercial lockages and the movement of 14,338,740 tons of 
commodities."

   The USDA weekly Grain Transportation report said that as of week 51 (Dec. 
24), total grain barge tonnages in 2016 reached 42.4 million tons, 20% higher 
than last year's annual total. "Furthermore, with one week remaining in the 
year, the year-to-date cumulative total grain tonnage moved during 2016 is 
already the highest since 2003, when the annual tons were 42.5 million tons." 

   In 2015 during the fourth quarter, there was only one week when the weekly 
tonnages exceeded 1 million tons. In comparison, during the fourth quarter of 
2016, there were seven times when the weekly tonnage exceeded 1 million tons, 
according to USDA. "In addition, there were six weeks during July and August 
when the weekly tonnages exceeded 1 million tons." 

   WRDA 2016: WILL IT BE ENOUGH? 

   The Water Resources Development Act (WRDA) of 2016 was officially signed 
into law by President Barack Obama on Dec. 16, 2016. The law authorizes the 
USACE to address the needs of America's harbors, locks, dams, flood protection 
and other water resources infrastructure critical to the nation's economic 
competiveness.

   The Mississippi River watershed is the fourth largest in the world, 
extending from the Allegheny Mountains in the east to the Rocky Mountains in 
the west. The watershed includes all or parts of 31 states and two Canadian 
Provinces. The watershed measures approximately 1.2 million square miles, 
covering about 40% of the lower 48 states, according to the U.S. National Park 
Service. As the river makes its 2,350-mile journey south to the Gulf of Mexico, 
it is joined by hundreds of tributaries, including the Ohio and Missouri Rivers.

   As the aging 28 locks and dams continue to deteriorate, especially when 
damaged by floods, the USACE has to make costly repairs and, in some cases, put 
a Band-Aid on the damaged locks. The USACE has said that it is "unable to 
adequately fund maintenance activities to ensure the navigation system operates 
at an acceptable level of performance." 

   Mike Steenhoek, executive director of the Soy Transportation Coalition 
(STC), said in an email to DTN, "The future of the U.S. Waterways depends on 
better funding from the government before it's too late to repair the aging 
locks and dams." 

   "Great nations, as well as great industries, continue to invest in 
themselves," said Steenhoek. "Investing in infrastructure should not be an 
isolated incident. It needs to be perpetual." Following is a link to the STC 
analysis, "Farm to Market: A Soybean's Journey." The attached summary 
highlights the need to continue to invest in infrastructure. 
http://www.soytransportation.org/FarmToMarket/FarmToMarketSummary.pdf

   Mary Kennedy can be reached at mary.kennedy@dtn.com    

   Follow Mary Kennedy on Twitter @MaryCKenn

******************************************************************************
China's Final Word on US DDGS Imports: Higher Tariff, Duties

   In a further escalation of battles between the U.S. and China over trade, 
China's Ministry of Commerce on Tuesday increased some significant anti-dumping 
duties and tariffs on distillers dried grains from the U.S. 

   China duties and tariffs -- which have already had a significant impact on 
exports of distilled grains -- were increased Tuesday by China on distillers 
grains in a final ruling following a year-long trade probe. Anti-dumping duties 
were set at a range from 42.2% to 53.7%, while anti-subsidy tariffs will be 
between 11.2% and 12%.

   The duties and tariffs apply to both distillers dried grains with and 
without solubles and will be in effect for five years from Thursday, according 
to news reports.

   China originally launched an investigation into U.S. distillers dried grains 
-- with and without solubles -- a year ago after a petition was filed by the 
China Alcohol Drinks Association against the U.S.

   Last September, in a preliminary ruling, China's Ministry of Commerce stated 
that the U.S. was dumping distillers dried grains in China, damaging the 
domestic industry, thus requiring them to pay a duty on distillers dried grains 
with and without solubles from the U.S. China had originally imposed an 
anti-dumping deposit of 33.8% and added an anti-subsidy tariff of 10% to 10.7%.

   The duties and tariffs are a blow to the U.S. distilled grains market. USDA 
reported on Jan. 6 that U.S. exports of distillers grains were down 9% in the 
first 11 months of 2016 from a year ago, hurt by a 63% drop in China's total. 
China's absence has given other countries a chance to pick up the slack. In 
November, U.S. exports were actually up 9% from a year ago, led by Vietnam and 
Mexico.

   Yet, there are also troubles in Vietnam for U.S. distilled grains. In 
mid-October, Vietnam, the third top importer of U.S. distillers dried grains 
with solubles, announced it would suspend imports in mid-December because of 
contamination from the "Ballion" variety of beetle. In mid-December, Vietnam 
did indeed ban imports of U.S. distillers dried grains with solubles until 
Vietnamese officials meet with USDA staff to address the fumigation process, 
the ban will stay in place. Expectations from merchandisers are that a meeting 
may take place by mid-February, but nothing official has been announced.

   The U.S. Grains Council said in a statement Thursday that it was "deeply 
disappointed in this series of events that is a severe departure from our 
industry's three decades of broad, cooperative work with China's government and 
livestock industry and that follows a year of extensive cooperation on the part 
of the U.S. DDGS and ethanol industry with MOFCOM investigations."

   "The decisions in the anti-dumping and countervailing duties investigations 
are not supported by the evidence and raise serious questions regarding the 
ministry's compliance with standard AD/CVD procedures and with China's 
international obligations," the Grains Council said in its statement. "While 
painful and damaging to the U.S. DDGS industry, their biggest negative impact 
will ultimately be on China's feed and livestock industries, which risk losing 
access to an important and cost-effective feed ingredient, and on millions of 
Chinese households that will likely face greater food price inflation and less 
access to affordable, wholesome pork, poultry and dairy products."

   The China decision comes 10 days after action by the Chinese government to 
increase tariffs on imported U.S. ethanol from 5% to 30%. USGC said the latest 
action effectively stopped a "growth market for U.S. farmers and ethanol 
producers. U.S. farmers also continue to wait for China's approvals of biotech 
corn events, which last happened in 2014." 

   Here is a link to the complete press release: 
http://www.grains.org/news/20170111/us-grains-council-statement-china-actions 

   Informa Economics said that the uncertainty of export demand from top 
destinations in coming months is keeping end users from booking very far 
forward. "Prices are apt to soften enough for other export destinations to 
realize the value of distillers and increase their usage. The lack of 
confidence in export sales in coming months suggests that relative prices to 
corn and soybean meal will continue to stay below five-year average levels."

   Mary Kennedy can be reached at mary.kennedy@dtn.com 

   Follow Mary Kennedy on Twitter @MaryCKenn

******************************************************************************
2016 Transportation Review: Rail

   Part one of this two-part column looks at the performance of Class 1 rail 
carriers during 2016 and the challenges they faced throughout the year.

   **

   The year started out slow for the railroads due to low grain prices and a 
slowdown in coal and oil shipments. In March 2016, Matthew Rose, chairman of 
BNSF Railway, spoke during the Montana Energy conference in Billings, Montana, 
and reported that about 4,600 railroad employees were furloughed nationwide.

   Rose told conference attendees that the furloughs amounted to about 10% of 
the railroad's workforce, about the same level of furloughs it had in 2007 and 
2008, the beginning of the recession.

   News reports stated that as of mid-May, the BNSF also "parked" more than 
1,500 locomotives at rail hubs across the BNSF system. Shippers in North Dakota 
reported that some shuttle trains were taken out of service due to inactivity.

   The Union Pacific placed about 2,700 hourly workers on trains, engines and 
yards on temporary layoff at the end of 2015 and placed about 1,000 locomotives 
in storage. The Canadian Pacific (CP) was reported to have cut over 1,000 jobs 
in 2016 and noted in June 2016 that the railroad had "thousands" of unused 
covered hopper cars and hundreds of locomotives sitting parked. 

   However, the railroads moved more grain in June, July and August as shippers 
got ready for the 2016 harvest. A source knowledgeable with BNSF told DTN that 
the number of furloughed employees was at about 2,000 in mid-August and that 
reduced coal and oil traffic has resulted in a significant amount of rail 
capacity that agriculture could use.

   The USDA weekly Grain Transportation report noted that, beginning in 
mid-June, car loadings rose significantly higher than recent years. "Grain car 
loadings were well-above the prior three-year average for the remainder of 
2016. Car loadings hit a record high during the week ending Nov. 5 at 28,655 
carloads, higher than they had been in almost a decade. These high volumes were 
associated with some increases in outstanding orders (backlogs) and higher 
auction market prices compared to 2015. However, the levels were much lower 
than the significant service problems and secondary market price spikes seen in 
2013 and 2014." 

   According to STB service metrics, backlogged car orders for the months of 
October and November in 2016 were higher than the same months in 2015, 
averaging a weekly total of 3,369 cars in 2016 compared to 2,450 cars in 2015.

   "2016 ended up being a year of relative high demand for grain rail service," 
noted USDA. "At the same time, declines in total rail traffic, due primarily to 
declines in coal shipments, meant that the grain rail supply was capable of 
handling the high demand without significant issue."

   As the end of the year approached, weather dealt a harsh blow to rail 
service in the Northern Plains starting at the end of November. Below-zero 
temperatures and heavy snow in many locations across the Northwest, Montana, 
Powder River and Twin Cities Divisions negatively affected normal service 
performance involving track and equipment. This resulted in some train delays 
for BNSF. A 40-mile portion of the Mobridge Subdivision near the North 
Dakota-South Dakota border was out of service in early December as crews had to 
clear snow drifts as high as 8 feet, some of which had buried engines sitting 
on the track. In a Dec. 9, 2016, service advisory, BNSF said, "We will continue 
to take all necessary actions, including deployment of additional heating 
equipment and plows, to address impacted areas." 

   In a Dec. 29, 2016, podcast, John Miller, group vice president for BNSF ag 
products, said, "BNSF faced service challenges from frequent, severe winter 
storms impacting the Northern Corridor. High winds and snow negatively affected 
normal service performance involving track and equipment which contributed to 
an elevated number of trains holding and delays." Miller mentioned that train 
crews were having trouble getting to trains because of poor road conditions. 
"We are also prepared to implement procedures, including the re-routing of some 
traffic, to minimize disruption as much as possible," added Miller.

   In their weekly service report to the STB, BNSF reported that for the week 
ending Dec. 31, 2016, the total number of loaded and empty grain cars that had 
not moved in 120 hours stood at 536 (loaded) and 773 (empty). There were 2,832 
empty and 2,106 loaded cars that had sat for greater than 48 hours, but less 
than or equal to 120 hours. However, outstanding car orders in North Dakota 
stood at 164 and were, on average, 6.3 days late. Shuttle trips per month were 
at 2.1 versus 2.3 the prior week. 

   The CP noted in its weekly update to the STB that for the week ending Dec. 
31, the total number of loaded and empty grain cars (U.S.) that had not moved 
in 120 hours stood at 209 (loaded) and 38 (empty). There were was 51 empty and 
150 loaded cars that had sat for greater than 48 hours, but less than or equal 
to 120 hours. However, outstanding car orders in North Dakota stood at 957 and 
were, on average, 1.31 weeks late, with Minnesota at 917 outstanding orders, 
1.49 weeks late. 

   Heading in to the first week of 2017, weather conditions didn't improve 
much. Bitter cold blanketed the Northern Plains, and the National Weather 
Service in Bismarck reported that for the week of Jan. 8, more snow will fall 
throughout North Dakota, with dangerous wind chills expected Tuesday through 
Friday. While the BNSF has activated round-the-clock command centers and winter 
action plans to monitor conditions and manage response to any service 
interruptions, Mother Nature is the one calling the shots.

   **

   Editor's Note: Part two of this column next week will cover barge 
transportation for 2016 and the challenges faced along the U.S. waterways.

   Mary Kennedy can be reached at mary.kennedy@dtn.com   

   Follow Mary Kennedy on Twitter @MaryCKenn

******************************************************************************
Stored Corn Going From Good to Bad

   Reports are surfacing of wet corn stored in piles turning sour, and in some 
cases, sprouting. While some of the piles were uncovered and hit with heavy 
snow and rain, some covered piles have been affected as well if corn was too 
wet when stored. It's a shame, given the 2016 corn quality was deemed 
"excellent."

   In their sixth-annual corn quality survey, the U.S. Grains Council (USGC) 
reported the 2016 corn crop "had an excellent crop condition during 
reproductive growth, as well as high yields, particularly from the Western Corn 
Belt. Overall, 2016 was characterized by a warm, dry vegetative period, 
followed by a warm and wet grain-filling period and harvest. Such favorable 
weather conditions in the United States have led to a projected record amount 
of corn in 2016 available for export."

   According to the report, the average U.S. aggregate moisture content 
recorded at the elevator in the 2016 samples was 16.1%, higher than 2015 
(15.7%), lower than 2014 (16.6%), and the same as the five-year average 
(16.1%). USGC noted that general moisture storage guidelines suggest that 14% 
is the maximum moisture content for storage up to six to 12 months for 
good-quality, clean corn under aerated storage in typical U.S. Corn Belt 
conditions; and 13% or lower moisture content is recommended for storage of 
more than one year. 

   "Because of higher moistures in 2016 than in 2015, and higher total damage 
levels in 2016 than in previous years, care should be taken to monitor and 
maintain moisture levels sufficiently low to prevent possible future mold 
growth," USGC stated in its report. 

   Here is a link to the entire quality report: 
https://grains.org/key-issues/corn-harvest-quality-report

   SNOW, RAIN CREATE PROBLEMS FOR STORED CORN IN PILES

   Various reports from the Midwest say some corn was still too wet when 
stored, or corn in open piles was hit with rain and snow. A grain elevator 
manager in North Dakota told me that he talked with a farmer who was having 
trouble when his corn pile was rained on at Christmas, and the farmer is now 
feeding most of it because the quality downgraded. The elevator manager told me 
as far as elevators that have outdoor piles, the weather and BNSF railroad 
slowing down isn't helping any, and he thinks the corn should "come in ASAP and 
be put through the dryer and screener to make shuttle grade."

   Over Thanksgiving weekend, there was talk of a corn shuttle that was billed 
with 99 sour cars and the buyer made the loader take the shuttle back and then 
reload it. I have no knowledge of what that may have cost the shipper, but the 
demurrage penalties alone are $600 per hour past the 24-hour free time for 
loading a shuttle and then $1,000 per hour beyond 48 hours. Another shuttle was 
reported having trouble making grade early in December. Part of the reason corn 
went out of condition was likely due to some elevators being unable to secure 
freight and being unable to clean out their full elevators and bring the piles 
in and get it in condition to load ahead of the arrival of the shuttle. 

   Another North Dakota elevator told me that they are seeing some damaged and 
sour corn -- some from uncovered piles and some from bins where corn went in 
wet. "There are a few elevators fighting the snow and sour in their own piles; 
the snow is plugging up conveyors and sprouting. I hear it picked up about 3% 
moisture from the rain over Christmas," he added. 

   Besides the corn piles, there is plenty of bagged corn in the country due to 
lack of storage space at harvest. Sources tell me those appear to be OK. They 
are frozen solid, and the bagged corn will likely need to be run through a 
dryer or cleaner when it's ready to move to market. The danger with bags is if 
deer or other animals chew on them and the bag breaks open, the grain could 
spoil unless it gets picked up off the ground right away.

   Tim Luken, manager Oahe Grain Corp. in Onida, South Dakota, told me that he 
saw an open corn pile that was steaming due to heating up, which likely 
occurred after the 1 inch of rain that fell Christmas weekend. "I spoke to an 
elevator north of here that has 4 million bushels on the ground and said it was 
looking pretty good yet. There was likely some damage caused by the 2 inches of 
rain, especially underneath the piles where the ground is not frozen. He did 
say he is hoping by the end of January all his piles would be cleaned up." 

   VOMITOXIN IN STORED CORN 

   Angie Setzer, vice president of Grain Citizens LLC in Charlotte, Michigan, 
told DTN, "We are starting to have a few guys surprised by vomitoxin levels 
coming out of the bin. Some may not have had loads tested during harvest 
because end users at that point weren't testing every load, while others are 
finding levels are creeping up from where they were during the fall. If corners 
were cut in drying and the corn is 16%-plus, the toxin can continue to grow and 
problems will quickly multiply. I have heard, though, that some are finding 
levels increasing even with corn dried below that magic 16% level." 

   I spoke via email with Charles P. Woloshuk, a botany and plant pathology 
professor at Purdue University, whose responsibility is mycotoxins associated 
with grain production. The objective of his Extension effort is to inform and 
educate the grain producers, handlers and processors about mycotoxins. 
Surveying fields for disease and mycotoxins is a major component of his 
program, because diseases prior to harvest are the primary source of mycotoxins.

   Professor Woloshuk said, "The growth of this fungus requires a minimum water 
activity of about 90% and minimum temperature of low 20s degrees Celsius (70 
Fahrenheit) for growth and to produce vomitoxin (DON). In corn, this would 
translate to a moisture content of above 18%. So, I would not be too concerned 
about the 16% grain increasing in DON. My concerns with holding corn at 16% 
moisture and higher into the spring would be the potential accumulation of 
aflatoxins. The fungus that produces aflatoxin can grow at a moisture content 
at about 16%, and if the temperature is right, aflatoxins will accumulate. 
There is also a higher potential for storage fungi that will grow at 16% 
moisture. These fungi will destroy the grain as it warms." 

   Woloshuk added that the grain should be properly dried to 14% to 15.5%; 
13.5% if it is to be carried into the summer. "If there are farmers that have 
16% grain in their bins, it should be sold before the weather begins to warm in 
the spring," he added.

   Setzer added that we won't know the full extent of how badly the stored corn 
may or may not be infected until the corn really starts to move off the farm, 
"but at this point, in my particular trade area, it seems to be a rapidly 
growing problem."

   Mary Kennedy can be reached at mary.kennedy@dtn.com 

   Follow Mary Kennedy on Twitter @MaryCKenn 

******************************************************************************
Upper Mississippi River, Columbia-Snake River Close Until Spring 

   While it is an annual event for the Upper Mississippi River to close in 
mid-December until spring, the 14-week closure of the Columbia-Snake River 
locks is an extension of the normal winter closure, as major lock repairs will 
put the river out of commission.

   As winter arrives in the Midwest, the time has come to call an end to the 
Upper Mississippi River (UMR) shipping season until spring. The U.S. Army Corps 
of Engineers (USACE) in the St. Paul District said that navigation locks to all 
navigation would close Dec. 10. All vessels had to be south of Lock and Dam 10, 
in Guttenberg, Iowa, by then to ensure they were able to make it through the 
Rock Island District locks prior to scheduled winter maintenance.

   "The Corps of Engineers, Rock Island District, is performing maintenance at 
Locks 15, 16 and 17 this winter and will close these locks Dec. 13. They are 
expected to reopen March 3, 2017," said the Corps.

   The Mississippi River has been a busy highway for grain movement since 
summer. Basis levels along the entire river system were firm until recently, 
weakening especially in the UMR terminals above Lock and Dam 17. USDA reported 
that from June 5 to Sept. 3, total grain down-bound tonnages on the locking 
portions of the Upper Mississippi, Ohio and Arkansas Rivers surged to an 
average 1.01 million tons per week.

   Corn was the principal agricultural commodity moved, with 63% of the total, 
while soybeans were the second-highest commodity moved during the period, at 
31%. "A similar surge occurred since Oct. 2 with down-bound grain tonnages 
averaging 1.05 million tons per week," said USDA. "However, soybeans became the 
main commodity moved, representing 65%, compared to corn with 32% of the 
late-season total."

   "For the week ending Nov. 19, corn shipments on the locking portions of the 
Upper Mississippi, Ohio and Arkansas Rivers were 585,000 tons, the highest 
volume in 14 weeks," said USDA. "The corn volume represented 52% of the total 
grain shipments for the week, while the soybean volume was 47% of the total. 
Based upon the three-year average during November, soybean shipments typically 
represent 61% of total tonnages, while corn shipments represent 37%." Barge 
shippers in the UMR near the St. Paul, Rock Island Districts hurriedly moved 
corn downriver by the end of November ahead of the winter closure. 

   While the rivers below the closure are still in operation, there is a 
concern that the current Southern drought will cause water levels to continue 
to drop, requiring barges to lighten the amount of grain they can move due to 
low water levels. On Nov. 19, a tow of 42 grain barges ran aground near 
Memphis, Tennessee, temporarily closing the river there and stalling traffic 
heading to the Gulf. As of Dec. 16, the Mississippi River at Memphis was 4.5 
feet and falling, and the river at St. Louis was 5.6 feet and falling.

   Thomas Russell, co-owner of the Russell Marine Group in New Orleans, told 
DTN, "Water flows will be restricted in downriver areas as the river freezes in 
the northern areas. St Louis Harbor in the downriver area of Upper Miss could 
be impacted. Water levels could drop 2 feet over (the) next week or two. St. 
Louis Harbor will require monitoring as water levels are low with not much rain 
predicted. By early January, St. Louis water levels may drop as low as zero on 
the gauge."

   COLUMBIA SNAKE RIVER SYSTEM CLOSED FOR EXTENSIVE LOCK MAINTENANCE

   The Pacific Northwest (PNW) will face river shipping disruptions as the 
USACE shutters the Columbia Snake River System (CSRS) until March 20, 2017, to 
improve and repair four major locks and dams. According to U.S. Wheat 
Associates (USW), that river system is a vital transportation link for wheat 
producers in the states of Idaho, Montana, Oregon and Washington. The economies 
of these four states rely heavily on the commerce that flows up and down this 
system. The CSRS is the No. 1 U.S. wheat-export gateway. The deep draft channel 
supports 46 million tons of cargo each year, valued at $20 billion. The inland 
system supports more than 9 million tons of cargo.

   "Such extended closures are unusual but, as our overseas customers learned 
during the last extended closure in 2010/11, the entire PNW system is fully 
capable of ensuring an uninterrupted supply of wheat to export terminals," said 
U.S. Wheat Associates.

   "USW believes the industry will consider every logistical option to keep 
wheat, especially soft white (SW) wheat, flowing to export elevators. 
Significant changes will help make this closure more manageable. For example, 
total export terminal storage capacity on the Columbia River has grown 
substantially since 2011. The addition of an entirely new terminal, plus the 
construction of new storage at several others, has increased storage capacity 
from 564,000 metric tons to 866,000 mt today. The PNW's total up-country grain 
storage capacity has also grown to 17.3 million metric tons from 16.4 mmt."

   A PNW exporter told DTN that exporters prepared for the closure by bringing 
in loaded barges from the CSRS to their facility and storing them on the water. 
Buyers prepared for the three-month closure by buying more wheat ahead of the 
closure and then will load up again when the river reopens in March. The 
exporter said that there are three very capable rail shuttle shippers now in 
Washington, and many other rail loaders that can ship from Oregon, Idaho and 
Washington.

   Another PNW exporter said in an interview that the closure may hurt exports 
a little, and said that South America may be one spot where they lose a little 
business. Most buyers are going to buy soft white wheat no matter what, but a 
small majority are price sensitive. The shuttle shippers were trying to add a 
big premium during the closure, but the futures rally late October caused the 
premium to drop. SW wheat has already been at a big premium due to the farmer's 
financial position and ability to store, he added.

   The extended lock outage plan is a coordinated effort between Portland and 
Walla Walla districts, whose goal is to prioritize needed lock repairs along 
the Columbia and Snake rivers to minimize the impact lock closures have on 
river users, according to USW. Here is a link to the PNW Waterways Association 
fact sheet on the Lock closures: http://bit.ly/2hRx1N0. 

   Mary Kennedy can be reached at mary.kennedy@dtn.com 

   Follow Mary Kennedy on Twitter @MaryCKenn 

******************************************************************************
Typecasting Markets

   In this week's On the Market column "Breaking the Rules" (available on DTN 
subscription sites), I talked about the four simple rules I have for analyzing 
markets. I also mentioned the market type table I put together for DTN more 
than a decade ago that I use in following the previously mentioned Rules 1 and 
2. As the years have gone by, and I've mentioned the table in writing and 
presentations, we get asked where it appears on DTN. Well, it has no permanent 
home other than a dog-eared copy I have at my desk. 

   But I attached a picture of most of the table to this blog post. 

   Let's discuss: 

   I classify markets for a number of different reasons, the most important one 
being, because we can't always believe what we read in the news or see in USDA 
supply and demand tables. We need a way to block out all the unnecessary noise 
(yes, USDA reports are unnecessary noise) to find out what traders, both 
noncommercial (investment, funds, etc.) and commercial (those involved in the 
underlying cash commodity), really think of a particular market. We can do this 
by simply studying trends (price direction over time) of futures and futures 
spreads. 

   First the trend of futures: My view differs from almost everyone else in the 
industry in that I believe the flow of noncommercial money into or out of a 
market sets the trend. Most everyone else says it is commercial activity, with 
noncommercials following that sets the trends. I don't see it, never have seen 
it, and certainly not with the evolution of computerized trade over the last 10 
years or so. I watch futures trends, mostly on weekly and monthly charts, to 
keep track of whether or not noncommercial traders are buying or selling. 

   But what about fundamentals? Do I pay attention to those at all? Yes, in my 
own way, by tracking the trend of futures spreads (price difference between 
contracts of a particular market) and looking at a market's forward curve 
(series of futures contract prices plotted on a single line). Using mostly 
weekly studies, I can see how both the short-term and long-term commercial view 
of supply and demand is changing. 

   Combining these two views, noncommercial and commercial, gives us our nine 
different market types. Many of you might think that the two views must usually 
be in line with each other. But as the table shows, that only covers about one 
third of the market types. The rest are some variance of one or the other being 
bullish, neutral, or bearish, while the other is not. And it's those 
differences that make market analysis interesting. 

   Take the recent rally in crude oil for example. Investment traders came 
rushing to the market to buy on headlines of production cut deals within OPEC 
and with non-OPEC countries. This pushed the domestic West Texas Intermediate 
(WTI) spot futures contract to a 24% gain over the last four weeks. Meanwhile, 
the nearby futures spread has seen its contango (carry) increase 67 cents to 
$1.06 (a 58% change) over that same timeframe. Recall that a stronger 
contango/carry means a more bearish commercial view of supply and demand. This 
leaves WTI as a Type 3 market, or one where noncommercials are bullish and 
commercials are bearish. How do you think this sort of divergence usually ends? 
Do you remember the summer of 2008 when crude oil was at $140 and the media was 
talking $200? At the same time, the contango was strengthening, and where did 
WTI finish the year? That's right, down near $30. 

   This is just one example of how the table can be used, although there are 
countless others. And as discussed in Friday's column, it plays a major role in 
how I put together my annual market outlook I present at the DTN/The 
Progressive Farmer Ag Summit each December. 

   To track my thoughts on the markets throughout the day, follow me on 
Twitter:www.twitter.com\Darin Newsom

   (BAS)

******************************************************************************
Forward Thinking: Time to Sell the Carry?

   The corn harvest this past fall ended up in the bin at the farm or elevator 
and spilled over into ground piles. The cash price deterred many farmers from 
selling off the combine and they instead stored their corn in hopes the prices 
get better down the road. Plus, with record soybean production in most of the 
Midwest, farmers' cash crop of choice since fall has been soybeans.

   The market continues to tell the farmers to store their corn for now, which 
is apparent in the current futures carry we are seeing. As of midday, Dec. 9, 
the carry from the March futures to December 2017 futures was running about 7 
cents per month. Farmers add up their carrying costs which include interest, 
insurance and storage, in order to determine if and when they should sell their 
cash crop in 2017. They can book a hedge-to-arrive (futures fixed) contract 
with their local elevator or they can look at the posted basis for the forward 
month they want to sell in order to determine their best cash price.

   I talked with merchandisers throughout the Midwest to find out when their 
farmers were looking to sell their corn. In eastern South Dakota, one 
merchandiser said, "The corn basis levels are better the further out you go out 
and it doesn't look like ethanol plants are having any trouble finding corn to 
grind right now, and will not at the very least until all the piles get cleaned 
up. Local cash bids show a better carry than the futures as far out as May 
(cash carry 4 cents/month vs. futures carry of about 3 cents), which is nice 
for on-farm stored corn, but more or less a wash with commercially stored 
corn."  

   He also added that there hasn't been much selling lately, but the farmers 
who are choosing to sell are forward contracting for late winter or early 
summer delivery because of that carry. However, farmers paying storage at the 
elevator aren't really "playing" the carry, but are basically just hoping for a 
better flat price in the future. He also noted that in his area he has seen 
very little new crop sales at this point.

   A merchandiser in central South Dakota said the vast majority of farmers are 
still mainly flat-price sellers and corn basis in the Corn Belt has remained 
firm as farmers opted to sell soybeans and pocket ARC/PLC payments to fulfill 
cash obligations at year-end. "Getting corn from the farmer has been like 
pulling teeth, and spreads/basis reflect that," he added. "Since the corn flat 
price is not high enough to induce widespread movement, we will need a flat 
price rally to get the corn to move or basis and spreads going to have to 
continue doing the work."

   Further west in Rapid City, S.D., Jerry Cope, who does the grain marketing 
for Dakota Mill & Grain, Inc. said, "There are significant bushels of corn in 
western South Dakota, but most growers are waiting and not selling the carry. 
Basis for the feed market is flat and the futures carry in corn looks small 
compared to winter wheat."

   Up in North Dakota where a record corn crop was harvested this past fall, a 
merchandiser in eastern end of the state said his elevator hasn't had anyone 
sell the carry on any of the grains. He said he really hasn't bought much corn, 
other than some sales contracted at a later price. He has done hardly any 
to-arrive contracts on old crop and no sales on new crop. He feels that there 
is about 70% of the fall harvest corn left to sell. Another merchandiser in the 
area said that most elevators weren't giving much of a carry because of the 
uncertain freight costs and market conditions.

   Angie Setzer, vice president of Grain Citizens LLC in Charlotte, Michigan, 
said that as far as corn forward sales, "We're just getting started with some 
HTAs in December corn around $3.90 futures. Most of these we will roll forward 
once carry in the new crop year widens out to traditional/historical levels."

   WHAT ABOUT SOYBEANS?

   "Right now we've been seeing a lot of bean sales for next harvest/November 
futures. Many of my guys who have to deliver right at harvest are selling 
straight cash, because historically basis does not tend to strengthen for 
harvest beans unless there's a production issue," Setzer said.

   Back in eastern South Dakota, the merchandiser there said they are not used 
to seeing a carry in soybeans and he thinks farmers are wary of that and are 
holding onto pretty much everything they didn't deliver at harvest. "There is 
also the 'store and hope' guys who remember the rally last Mar-Jun and have 
their beans in the bin in good shape so they will hold on for that. Basis gets 
better the further you get away from the spot market, but then widens out again 
after March which is probably because we are so reliant on the PNW export 
program."

   He hasn't seen much pricing of old crop soybeans on the recent rally but 
said if farmers are pricing it, they are likely selling for 
February-through-March delivery. "I have heard of a few guys pricing new crop 
pricing via straight forward contracting for harvest delivery though. Basis 
levels here for new crop are pretty much about where they usually are this far 
ahead of harvest, -80X to -100X but the flat price is at a profitable level so 
those that are selling, are forward contracting," he added.  

   In North Dakota, the merchandiser said their volume is close to double what 
they do at this time of the year for new crop beans and farmers in his area are 
somewhat active in the 2017 new crop soybean market. "Old crop beans are 
probably 65 to 70% sold at this point, some of that price-later sales, with the 
majority of selling being HTA Nov '17," he said. He added, "It is feeling like 
they will keep selling beans, then wheat, and someday corn if and when it 
reaches above $3-plus in his area."

   Kent Hamm, buyer for the DeLong Company in Minooka, Illinois, said 99% of 
his cash purchases during the last 30 days have been soybeans. "The only corn 
purchases has been very late-harvested fields still standing, coming to the 
elevator for drying. Most bean purchases have been 50/50 on farm to deliver and 
the other half (50%) is elevator open storage pricings for Jan. 1 payments. The 
only HTA trades have been SX7 for new crop beans. I anticipate many more acres 
of beans next harvest." He's not alone. Most merchandisers I spoke to 
throughout the Midwest think there will be more soybean acres added next spring.

   The current price structure is pretty much telling farmers to plant more 
soybeans, less corn. But besides price, only time, weather conditions and 
farmers can tell us what that reality will end up being.

   Mary Kennedy can be reached at mary.kennedy@dtn.com 

   Follow Mary Kennedy on Twitter @MaryCKenn

******************************************************************************
Eastern Corn Belt Imports North Dakota Corn

   Some parts of the Eastern Corn Belt (ECB) turned to the Northwest "Corn 
Belt" recently to purchase corn that was not infected with vomitoxin. They 
needed the corn to blend with their own corn to make it safe for feed use and 
also to comply with contract specifications for corn they shipped out.

   Exporting corn out of North Dakota is not a new concept. In 2012 when the 
severe drought in the U.S. caused high levels of aflatoxin in the heart of the 
Corn Belt, North Dakota corn moved to many parts of the affected areas. That 
year, North Dakota was unaffected by the drought and produced a clean corn crop 
that was useful to ethanol plants and corn processors in Illinois for blending. 

   Normally, the FDA does not allow aflatoxin-infected corn to be blended. 
However, in 2012 they allowed waivers for corn containing more than 20 parts 
per billion (ppb) to no greater than 500 ppb of aflatoxin to be blended with 
clean corn pursuant to strict guidelines set by the FDA for use as animal feed. 
At least six states, Iowa, Illinois, Indiana, Kansas, Oklahoma and Nebraska, 
were granted waivers for blending to safely feed certain livestock. Clean corn 
was shipped out of North Dakota with temporary rates from the railroads to help 
the infected states. 

   This year, aflatoxin is not the problem, but rather a member of its family, 
vomitoxin, which was found in some of the corn in parts of east-central Indiana 
and western Ohio. Vomitoxin occurs when there is too much rain at certain 
critical growth stages of the corn ear. Ethanol plants in the areas of the 
infected corn are unable to buy vomitoxin-tainted corn containing over 5 to 7 
parts per million (ppm) because the toxin could contaminate the ethanol 
byproduct, dried distillers' grains, that is sold for animal feed. 
Vomitoxin-tainted corn can be blended with zero-vomitoxin corn and does not 
need a special waiver granted by the FDA to do so.

   A BNSF shuttle loader in North Dakota told DTN that he knew of at least two 
North Dakota corn shuttles that were arbitraged in early November from the 
original delivery point of the Pacific Northwest (PNW) to Indiana. He wasn't 
sure what freight costs were because the full rate was not published, but he 
did hear that an ethanol plant in Indiana was paying at least a 10-cent premium 
for zero-vomitoxin corn, something that North Dakota has plenty of.

   According to another BNSF shuttle loader, another reason that the arbitrage 
worked was because corn basis to the PNW was bid at extremely cheap levels this 
fall. Besides the fact that there was not much of a corn export program on the 
PNW, most of the focus was on soybeans for export. Since most of the corn in 
North Dakota moves to the PNW, elevator basis is set by the price the PNW is 
willing to pay. However, since the first of November, the BNSF shuttle basis 
delivered to the PNW moved from +50Z to as high as +72Z last week, which has 
made the arbitrage to the ECB less profitable.

   Shuttle loaders on the CP railroad in North Dakota were in the same position 
as far as weak PNW basis in early November. The CP shuttle basis was posted at 
+46Z in early November, but did recover and moved to +60Z last week. A North 
Dakota CP shuttle loader told me he received calls from a few eastern Indiana 
and Ohio plants about selling them zero-vomitoxin corn. While the railroad 
added a tariff rate to Decatur, Illinois, out of North Dakota to move corn to 
the ECB, he said it is no longer competitive now that PNW basis has 
strengthened. 

   Mary Kennedy can be reached at mary.kennedy@dtn.com

   Follow Mary Kennedy on Twitter @MaryCKenn

******************************************************************************
Can Grains Get Worse?

   At times like these, when grain piles are high and farm incomes are falling, 
it can be easy to feel like things will never get better. The truth is there is 
no reason to believe that 2017 will not provide another year of good growing 
weather, but at this moment no one can say for sure. 

   As long as we are all adults and understand that yes, grain prices can go 
lower again in 2017, here are a few things to note from a longer-term 
perspective.

   Starting with corn, four consecutive years of good growing weather have 
taken spot corn prices down 54% the past 48 months. In fact, when spot prices 
closed at $3.01 1/2 at the end of August, the four-year price change hit a 
minus 62%. Going back to the presidency of JFK, corn has only had one four-year 
drop that severe and it happened in June 2000, coming off of a big spike in 
1996. Even the largest four-year decline of the 1980s only reached 55% in 
August of 1987.

   If we look at corn yields, the longest stretch of consecutive yields above 
trend in modern history happened in the seven years between 2003 and 2009. So 
yes, it would not be remarkable to see another above-trend corn yield in 2017. 
However, corn prices respond to many factors other than yield.

   Looking at spot corn prices, the longest stretch endured without reaching 
their one-year high in modern history was 4 1/2 years ended in February 1988. 
In the current bear market, corn's streak already ended at 35 months as spot 
corn reached its one-year high in July 2015 and again in June 2016. The 
opportunities did not last long, but they were there.

   The current king of bear markets is wheat where Chicago's spot prices are 
down 53% from where they stood four years ago and near their lowest prices in 
10 years. At the end of August, the four-year decline in Chicago wheat stood at 
59%, a drop that has only been approximated twice since the 1960s. The other 
two were a 58% drop in February 1978 and a 62% drop in April 2000.

   Except for one brief flicker in May 2014, Chicago wheat prices have not seen 
their one-year high in 52 months. This is eerily reminiscent of the 56-month 
stretch from April 1996 to January 2001 when prices finally rang the one-year 
bell at $2.85 1/2. Since the 1960s, there is no other time that comes close to 
these two long downward slides in wheat.

   As the lights dim on the bear markets for corn and wheat in 2016, it is fair 
to ask: can it get much worse than this? Our answer has to be yes, it can -- 
there is still downside risk in grain markets. But if it is any comfort, 
previous bears have rarely lasted this long or fallen this hard.

   Todd Hultman can be reached at todd.hultman@dtn.com  

   Follow him on Twitter @ToddHultman1

******************************************************************************

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