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Market Matters Blog           07/14 15:30
DDG Prices Higher Amid Good Demand
DDG Prices Higher as Buyers Seek Fresh Supplies
June Frost Hits South Dakota Corn; US Northern Plains Drought Intensifies 
DDG Prices Unchanged
Clock Ticking on STB to Make Permanent Decision on Rail Rate Challenges
DDG Prices Firm on Steady Demand
From Heavy Winter Snow to Drought in North, South Dakota
DDG Prices Driven Higher by Rise in Corn Futures
Auld Lang Syne 2016-17 Winter Wheat Crop Year
DDG Prices Flat

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DDG Prices Higher Amid Good Demand

   The DTN average dried distillers grains spot price was up $3 from one week 
ago, at $107, for the week ended July 13. Of the 39 locations from which DTN 
collects spot prices, 21 bids were $2 to $17 higher; 2 bids were $3 lower; and 
the balance of the prices were unchanged.

   The value of DDG relative to corn for the week ended July 13 based on the 39 
bids, was at 82.99% and the value of DDG relative to soybean meal was at 
33.77%. The cost per unit of protein for DDG was $4.28, compared to the cost 
per unit of protein for soybean meal at $6.67.

   Prices were higher earlier in the week ahead of the USDA report, and while 
they came off those highs after the bearish outcome for corn in that report, 
they still remain firm with some supply tightness noted in the east. We will 
likely see price volatility for the rest of July as both corn and soybean meal 
production expectations will be subject to a weather market.

   CIF NOLA (New Orleans, Louisiana) dried distillers grains with solubles, or 
DDGS, prices for the week ended July 16 were higher at $140 to $152.50 for 
July, and August/September prices were at $138 to $145. Bids for barges have 
been firming the market up according to merchandisers, as some of the shorts at 
the Gulf are needing to cover contracts. Barges bid for first half August are 
currently at a premium to last half.

   On July 13, USGC reported exports of distillers dried grains with solubles 
(DDGS) to Southeast Asia have increased 16% so far this marketing year, 
according to data from USDA and analysis by the U.S. Grains Council (USGC). The 
Southeast Asian region, composed of Brunei, Cambodia, Malaysia, Myanmar, the 
Philippines, Singapore, Thailand, and Vietnam, currently represents the 
third-largest market for U.S. DDGS. Thus far in the marketing year (September 
2016-May 2017), sales to the region totaled more than 1.7 million metric tons, 
accounting for 20% of overall U.S. DDGS exports. 

   "U.S. DDGS exports have increased to seven of the eight countries within the 
region this marketing year. Year-over-year, shipments of U.S. DDGS have 
increased by 55% to Thailand, to 630,000 tons, and 42% to Indonesia, to 348,000 
tons. In addition, U.S. DDGS exports have more than doubled to both Malaysia 
and Myanmar compared to the same time the year prior. While sales are down to 
Vietnam due to outstanding market issues, the country's more than 490,000 tons 
in purchases still rank as the seventh-largest market for U.S. DDGS," said USGC.


                               CURRENT    PREVIOUS    CHANGE
COMPANY   STATE                           7/13/017   7/03/017
Bartlett and Company, Kansas City, MO (816-753-6300)
          Missouri            Dry           $120       $120     $0
                              Modified      $60        $60      $0
CHS, Minneapolis, MN (800-769-1066)
          Illinois            Dry           $110       $108     $2
          Indiana             Dry           $110       $105     $5
          Iowa                Dry           $110       $105     $5
          Michigan            Dry           $100       $98      $2
          Minnesota           Dry           $105       $100     $5
          North Dakota        Dry           $120       $115     $5
          New York            Dry           $125       $125     $0
          South Dakota        Dry           $105       $105     $0
MGP Ingredients, Atchison, KS (800-255-0302 Ext. 5253)
          Kansas              Dry           $108       $105     $3
POET Nutrition, Sioux Falls, SD (888-327-8799)
          Indiana             Dry           $112       $115     -$3
          Iowa                Dry           $105       $105     $0
          Michigan            Dry           $110       $110     $0
          Minnesota           Dry           $105       $102     $3
          Missouri            Dry           $125       $125     $0
          Ohio                Dry           $112       $115     -$3
          South Dakota        Dry           $100       $100     $0
United BioEnergy, Wichita, KS (316-616-3521)
          Kansas              Dry           $110       $108     $2
                              Wet           $45        $45      $0
          Illinois            Dry           $116       $112     $4
          Nebraska            Dry           $110       $108     $2
                              Wet           $45        $45      $0
U.S. Commodities, Minneapolis, MN (888-293-1640)
          Illinois            Dry           $105       $100     $5
          Indiana             Dry           $105       $95      $10
          Iowa                Dry           $105       $100     $5
          Michigan            Dry           $105       $95      $10
          Minnesota           Dry           $105       $95      $10
          Nebraska            Dry           $105       $99      $6
          New York            Dry           $135       $125     $10
          North Dakota        Dry           $105       $100     $5
          Ohio                Dry           $115       $98      $17
          South Dakota        Dry           $100       $90      $10
          Wisconsin           Dry           $100       $98      $2
Valero Energy Corp., San Antonio, TX (402-932-5901)
          Indiana             Dry           $97        $97      $0
          Iowa                Dry           $98        $98      $0
          Minnesota           Dry           $100       $100     $0
          Nebraska            Dry           $100       $100     $0
          Ohio                Dry           $108       $108     $0
          South Dakota        Dry           $90        $90      $0
          California                        $168       $168     $0
Western Milling, Goshen, California (559-302-1074)
          California          Dry           $180       $180     $0
*Prices listed per ton.
          Weekly Average                    $107       $104     $3
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

   Follow her on Twitter @MaryCKenn

    

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DDG Prices Higher as Buyers Seek Fresh Supplies

   The DTN average dried distillers grains, or DDG, spot price was up $2 from 
one week ago, at $104, for the week ended July 6. Of the 39 locations from 
which DTN collects spot prices, 12 bids were $2 to $10 higher and the balance 
of the prices were unchanged.

   The value of DDG relative to corn for the week ended July 6 based on the 39 
bids, was at 76.58% and the value of DDG relative to soybean meal was at 
32.50%. The cost per unit of protein for DDG was at $4.16 compared to the cost 
per unit of protein for soybean meal which was at $6.74.

   Prices have firmed this week after the long holiday weekend ended as 
end-users were anxious to buy fresh spot supplies. Many buyers are watching the 
soybean markets as the cash prices firmed the past five days, boosting soymeal 
prices with it. Also, buyers are watching the corn market which has moved 
higher the past week, but hasn't jumped as much as the soybean market.

   The DDG market may not see much in the way of deferred pricing for now. 
Buyers will keep an eye on the weather and how it will affect the new-crop corn 
as it heads into its critical pollination stage.

   CIF NOLA (New Orleans, Louisiana) dried distillers grains with solubles, or 
DDGS, prices for the week ended July 6 were $138 to $142 for July, and 
July/August/September prices were at $137 to $142. The U.S. Census Bureau 
reported Thursday that distillers grains exports for May totaled 742,043 metric 
tons, down 28% from one year ago. Mexico was the top export destination in May 
accounting for 18% of the total, with Turkey accounting for 14%. China was 
sixth, accounting for 5% of the total. In the first five months of 2017, 
exports of U.S. distillers grains were up 8% from one year ago.

   Vietnam was absent again and there still is no word on when the country may 
solve the new phytosanitary/fumigation requirements issue with USDA's Animal 
and Plant Health Inspection Service, or APHIS. Vietnam was the third-largest 
buyer of U.S. DDGS in 2016, accounting for 1.2 million metric tons. That 
distinction ended in mid-December when Vietnam halted imports.


COMPANY   STATE                           7/03/017   6/29/017
Bartlett and Company, Kansas City, MO (816-753-6300)
          Missouri            Dry           $120       $120     $0
                              Modified      $60        $60      $0
CHS, Minneapolis, MN (800-769-1066)
          Illinois            Dry           $108       $105     $3
          Indiana             Dry           $105       $100     $5
          Iowa                Dry           $105       $100     $5
          Michigan            Dry           $98        $95      $3
          Minnesota           Dry           $100       $95      $5
          North Dakota        Dry           $115       $105     $10
          New York            Dry           $125       $125     $0
          South Dakota        Dry           $105       $100     $5
MGP Ingredients, Atchison, KS (800-255-0302 Ext. 5253)
          Kansas              Dry           $105       $103     $2
POET Nutrition, Sioux Falls, SD (888-327-8799)
          Indiana             Dry           $115       $112     $3
          Iowa                Dry           $105       $105     $0
          Michigan            Dry           $110       $110     $0
          Minnesota           Dry           $102       $100     $2
          Missouri            Dry           $125       $125     $0
          Ohio                Dry           $115       $110     $5
          South Dakota        Dry           $100       $100     $0
United BioEnergy, Wichita, KS (316-616-3521)
          Kansas              Dry           $108       $108     $0
                              Wet           $45        $45      $0
          Illinois            Dry           $112       $110     $2
          Nebraska            Dry           $108       $108     $0
                              Wet           $45        $45      $0
U.S. Commodities, Minneapolis, MN (888-293-1640)
          Illinois            Dry           $100       $100     $0
          Indiana             Dry           $95        $95      $0
          Iowa                Dry           $100       $100     $0
          Michigan            Dry           $95        $95      $0
          Minnesota           Dry           $95        $95      $0
          Nebraska            Dry           $99        $99      $0
          New York            Dry           $125       $125     $0
          North Dakota        Dry           $100       $100     $0
          Ohio                Dry           $98        $98      $0
          South Dakota        Dry           $90        $90      $0
          Wisconsin           Dry           $98        $98      $0
Valero Energy Corp., San Antonio, TX (402-932-5901)
          Indiana             Dry           $97        $97      $0
          Iowa                Dry           $98        $98      $0
          Minnesota           Dry           $100       $100     $0
          Nebraska            Dry           $100       $100     $0
          Ohio                Dry           $108       $108     $0
          South Dakota        Dry           $90        $90      $0
          California                        $168       $164     $4
Western Milling, Goshen, California (559-302-1074)
          California          Dry           $180       $180     $0
*Prices listed per ton.
          Weekly Average                    $104       $102     $2
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

   Follow her on Twitter @MaryCKenn

******************************************************************************
June Frost Hits South Dakota Corn; US Northern Plains Drought Intensifies 

   That's not a typo in the title of this week's column. Over the last weekend 
of June, some of the already drought-stricken areas in north-central South 
Dakota saw a damaging frost on their corn. The frost didn't hit the winter or 
spring wheat, but that could be partially due to the fact that there isn't much 
winter wheat left in the fields. At least 75% of the winter wheat in the 
drought-stricken areas of South Dakota has been baled or sprayed out. Some 
authorities have declared that at least $20 million of crops in South Dakota 
have already been destroyed by drought or the June 24 frost, with more losses 
expected. Farmers have also recently started to bale drought-damaged spring 
wheat.

   The June 29 U.S. Drought Monitor showed that 2% of South Dakota is in 
extreme drought, 29% is rated in severe drought versus 18% the prior week, and 
the rest of the state is in moderate drought stage to abnormally dry. In North 
Dakota, 8% of the state is in extreme drought, 32% in severe drought, 27% in 
moderate drought and 33% is abnormally dry. In Montana, 48% of the state is 
facing some degree of drought, with 17% rated moderate, 18.4% rated severe and 
6.8% rated extreme, with the ratings for these three categories growing over 
the past week.

   Todd LaPlant, elevator manager at EGT, LLC, Glasgow, Montana, told me wheat 
conditions have not improved in northeast Montana (from Havre to the North 
Dakota border). "Spring wheat is beginning to turn this week, and anything that 
is up is heading, whether it's 6 inches tall or a foot tall. There is still 
probably 15% of the spring wheat crop that has not emerged yet. The very early 
planted spring wheat -- maybe 10% of the crop -- will make 20-30 bpa; the rest 
will maybe make 10 bpa if we don't see some rain in early July. The golden 
triangle is in good shape (west of Havre), but they are primarily winter wheat. 
Pulse crops are also in very poor shape with most peas blooming 6-8 inches 
tall."

   Conditions are slightly better -- so far -- in south-central North Dakota, 
according to Allan Rohrich, who farms with his brother Mark near Ashley and 
Zeeland. "In our general area, crops that got a start are still hanging on," 
Rohrich said. "Our early seeded wheat is short but headed and is filling. I am 
hearing lots of talk in town of producers who are finding nothing in the heads 
of many fields, leading to some haying of spring wheat here in south-central 
North Dakota. The heat that is forecasted for next week, I am afraid, will 
greatly reduce what yield and quality we might have gotten if we don't see any 
significant moisture before it hits."

   "Corn and soybeans are behind from the cold spring soil we had here. We have 
a decent stand of corn and soybeans, but you don't have to look very hard to 
find fields that are only partially emerged or some areas never came up," 
Rohrich said. "They are growing, and we are working on a post spray pass on 
them. They will need a lot of moisture and time to hit maturity.  They have 
been liking the warm temperatures but will need moisture as well before the 
forecasted heat wave."

   "Sunflowers were early planted for us and look very good," added Rohrich. 
"They are our best hope for a normal crop and may reward us for sticking with 
them through the wetter years. We only saw frost on one corn field and one 
soybean field. It did not appear to kill any corn, and most of the soybeans are 
coming back. Areas 10-30 miles south of us were hit much harder with frost. As 
with anything, we strive to have a positive outlook. We know the rain will come 
back, just a question of will it be a week too late." 

   Paul Anderson of Coleharbor, North Dakota, had this to say about wheat 
conditions in his area: "2017 will be the worst wheat crop for us since 1988. 
The early wheat did not get measurable rain until mid-June. Heads per acre and 
spikelets per head were set under drought conditions. Only kernel weight is yet 
to be determined. It looks tough 20 miles either side of HWY 83 between 
Bismarck to Minot, North Dakota."

   Alan Klain, Turtle Lake, North Dakota, said that, "We are in the dark red on 
the drought monitor here. Corn and beans are holding out, but not for long." He 
also told me that his pasture at home had cows on it until June 1 and then 
dried up. His hay ground is "burnt up" and his spring wheat is thin stands and 
headed out at barely a foot tall.

   On June 27, Tim Luken Manager Oahe Grain, Onida, South Dakota, told me, 
"Small grain harvest will be bleak. The corn looks much better, but many 
different stages in growth. I can see we will be having pollination issues in 
the coming weeks. On June 24, it did get down to freezing in low-lying areas, 
and you can definitely see what corn had frozen from Saturday night in the 
Gettysburg area. Talking with a few producers around here even 2 miles south of 
Onida in some low-lying corn fields, you can see the effects of the freeze."

   Luken added, "A week ago, we did receive anywhere from 0.35 to 1.8 inches of 
rain, and it sure made a difference as far as pastures and road ditches. I have 
seen more spring (wheat) sprayed out this past two weeks and also more spring 
wheat fields being bailed put up for feed. What wheat will be left for 
harvesting will have quality concerns. Both spring and winter wheat will likely 
have low test weight, high protein and high shrunk and broken count. The 
later-planted spring (wheat) will for sure be the best if it gets rain. I will 
guess that 75% of the winter wheat will be lost, 15%-20% of spring wheat and 
what's left will yield 15-25 bushels."

   MINNEAPOLIS SPRING WHEAT FUTURES SURGE 

   North Dakota is responsible for growing the majority of the U.S. spring 
wheat crop, followed by Montana and South Dakota. As the severity of the 
drought intensifies in those key growing areas, futures prices on the 
Minneapolis Grain Exchange have surged, hitting their highest level in three 
years, rising 34% in the month of June. The DTN Cash Index as of June 1, 2017, 
was at $5.33, and on June 30, it was $1.97 per bushel higher at $7.30.

   This, of course, means that the cash price paid to farmers for old- and 
new-crop spring wheat has increased substantially, but it's bittersweet for 
farmers who have been watching their new crop shrivel up due to the drought. 
And it may not end anytime soon.

   DTN Senior Ag Meteorologist Joel Burgio said in his July 2 forecast that 
rainfall potential in the Northern Plains during the next 10 days is "Rather 
limited for the region. Episodes of hot and very hot temperatures during the 
period increases stress to corn, soybean and spring wheat development. The most 
impacted areas would be in Montana and the west and central Dakotas."

   So, will we get to the double-digit wheat prices we saw in 2008? By July 29, 
2008, the U.S. Drought monitor showed the entire state of North Dakota in a 
drought, with nearly half of the state in the western portion classified as 
extreme to exceptional. At that time, I was buying wheat and durum at a grain 
elevator near Washburn, North Dakota, and quoting a flat price of $20 for wheat 
and $22 for durum delivered to the elevator. 

   Of course, some of the circumstances driving the prices that high were 
different at that time versus the current situation. One difference was that 
the 2008 drought had started well ahead of planting season, and another was 
that 100% of the state of North Dakota was under drought. However, USDA 
reported on June 30, 2017, that farmers planted only 10.3 million acres of 
spring wheat acres, a 45-year low and down 6% from 2016. Durum wheat planted 
acres were down 20%. Also, on June 29, StatsCan reported that Canadian farmers 
planted 15.8 million acres of spring wheat for 2017/18, 900,000 acres less than 
the prior estimate, and durum planted acres declined 16% to 5.2 million acres. 

   Given the lower acreage for 2017, it is my opinion that if Mother Nature 
continues to burn up the 2017 U.S. spring wheat and durum crop, there is no 
telling how much higher prices will go.

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

   Follow Mary Kennedy on Twitter @MaryCKenn

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DDG Prices Unchanged

   The DTN average dried distillers grains, or DDG, spot price was unchanged 
from one week ago, at $102, for the week ended June 29. Of the 39 locations 
from which DTN collects spot prices, seven bids were $1 to $5 higher, one bid 
was $1 lower and the balance of the prices were unchanged. 

   Areas where prices were flat to lower the past week was due in part to end 
users securing supplies ahead of the long July 4 holiday weekend, while areas 
where prices were a little higher saw more spot demand this past week, 
according to merchandisers.

   A merchandiser noted that markets were steady overall and that plant DDG 
supplies for the most part would be enough to handle the nearby demand through 
the holiday. The EIA reported that ethanol production was estimated at 1,015 
thousand barrels per day for the week ending June 23, a 25,000-bpd increase 
over the prior week.

   "Ethanol margins continued to improve, with slightly lower corn prices and 
higher DDG prices," noted Informa Economics. "The margin in central Illinois 
was estimated at $0.16 per gallon for June 19. Margins in other locations 
ranged from $0.04 per gallon to $0.30 per gallon."

   Informa Economics reported that if corn production and yields are as 
expected, adding downward price risk for corn, the price of DDGs may lose the 
current support. "The overall relative price to CBOT corn currently is 80%. 
This is lower than the three-year average of 117% and the five-year average 
price of 111%. Typically, the relative value of corn decreases from June to 
July. Given the outlook on corn and the softening of soybean prices, it is 
reasonable to expect distillers dried grains will likely continue to soften."

   CIF NOLA (New Orleans, Louisiana) dried distillers grains with solubles, or 
DDGS, prices for the week ended June 29 were $134 for June, and July prices 
were at $133 to $136. DDGS exports picked up in June after lower movement in 
May, which has been supporting prices.


                                                 CURRENT     PREVIOUS    CHANGE
COMPANY     STATE                                6/29/017    6/22/017
Bartlett and Company, Kansas City, MO (816-753-6300)
            Missouri              Dry              $120        $120        $0
                                  Modified         $60          $60        $0
CHS, Minneapolis, MN (800-769-1066)
            Illinois              Dry              $105        $105        $0
            Indiana               Dry              $100        $100        $0
            Iowa                  Dry              $100        $100        $0
            Michigan              Dry              $95          $95        $0
            Minnesota             Dry              $95          $95        $0
            North Dakota          Dry              $105        $105        $0
            New York              Dry              $125        $125        $0
            South Dakota          Dry              $100        $100        $0
MGP Ingredients, Atchison, KS (800-255-0302 Ext. 5253)
            Kansas                Dry              $103        $103        $0
POET Nutrition, Sioux Falls, SD (888-327-8799)
            Indiana               Dry              $112        $112        $0
            Iowa                  Dry              $105        $106       -$1
            Michigan              Dry              $110        $109        $1
            Minnesota             Dry              $100        $100        $0
            Missouri              Dry              $125        $125        $0
            Ohio                  Dry              $110        $110        $0
            South Dakota          Dry              $100         $99        $1
United BioEnergy, Wichita, KS (316-616-3521)
            Kansas                Dry              $108        $106        $2
                                  Wet              $45          $45        $0
            Illinois              Dry              $110        $108        $2
            Nebraska              Dry              $108        $106        $2
                                  Wet              $45          $45        $0
U.S. Commodities, Minneapolis, MN (888-293-1640)
            Illinois              Dry              $100        $100        $0
            Indiana               Dry              $95          $95        $0
            Iowa                  Dry              $100        $100        $0
            Michigan              Dry              $95          $95        $0
            Minnesota             Dry              $95          $90        $5
            Nebraska              Dry              $99          $99        $0
            New York              Dry              $125        $125        $0
            North Dakota          Dry              $100         $95        $5
            Ohio                  Dry              $98          $98        $0
            South Dakota          Dry              $90          $90        $0
            Wisconsin             Dry              $98          $98        $0
Valero Energy Corp., San Antonio, TX (402-932-5901)
            Indiana               Dry              $97          $97        $0
            Iowa                  Dry              $98          $98        $0
            Minnesota             Dry              $100        $100        $0
            Nebraska              Dry              $100        $100        $0
            Ohio                  Dry              $108        $108        $0
            South Dakota          Dry              $90          $90        $0
            California                             $164        $168       -$4
Western Milling, Goshen, California (559-302-1074)
            California            Dry              $180        $177        $3
*Prices listed per ton.
            Weekly Average                         $102        $102        $0
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 

   Follow her on Twitter @MaryCKenn

******************************************************************************
Clock Ticking on STB to Make Permanent Decision on Rail Rate Challenges

   Last week, the National Grain and Feed Association (NGFA) and others 
responded to the Surface Transportation Board's request for comments on 
improving procedures, saying that the nature of the SAC standard the board uses 
is the single greatest source of delay in processing SAC cases.

   It's been over two years since the Surface Transportation Board (STB) held a 
June 10, 2015, hearing in Washington, D.C., to give rail shippers, agricultural 
organizations and railroad companies the opportunity to express their opinions 
about improving procedures to set fair shipping rates. Through those meetings, 
the STB explored the issue of "making the rate-case process more accessible" to 
all shippers who use rail as their mode of transportation. The Staggers Rail 
Act of 1980 provides rail shippers with the ability to challenge unreasonable 
rates. 

   In a June 11, 2015, news release, the day after the hearing, the NGFA noted 
that, in 2014, they developed and proposed a new rate-reasonableness 
methodology, dubbed the "agricultural commodity maximum rate methodology" as 
one approach that the STB could use to change its existing procedures to 
resolve rail rate challenges involving agricultural products. The NGFA said 
that its proposed new approach would "meet the tests of being more accessible 
and inexpensive to administer, including for shippers with smaller claims; 
provide a meaningful constraint on the ability of carriers through their 
rate-pricing practices to make certain facilities uncompetitive in shipping by 
rail, and provide for more expedited and timely decisions."

   The STB continued to hold informal meetings with stakeholders and then 
issued an Advance Notice of Proposed Rulemaking (ANPRM) on June 15, 2016, 
seeking formal comment on specific ideas raised in the informal meetings as 
well as comments on any other relevant matters. Based on the comments, the 
board proposed specific changes intended to help improve the rate review 
process and expedite rate cases. 

   The proposed rules were not intended to be a "comprehensive response" to the 
comments received on docket No. EP 733, nor were they the "final action" the 
board planned to take to improve the rate review processes for all shippers. 
The board noted it would continue to evaluate the comments received and review 
its regulations generally, and propose additional revisions at a later date if 
warranted. 

   That later date came in a decision posted on their website March 30, 2017, 
where the board announced that, "Pursuant to Section 11 of the Surface 
Transportation Board Reauthorization Act of 2015, the STB is proposing changes 
to its rules pertaining to its rate case procedures to help improve and 
expedite the rate review process." Comments were due by May 15, 2017, and reply 
comments were due June 14, 2017. 

   Here is a link to Docket No. EP 733 EXPEDITING RATE CASES: 
https://goo.gl/XBk4W6 

   INDUSTRY ANSWERS BACK AGAIN

   There were plenty of comments and replies to those comments sent to the STB 
from industries who supported the changes and those who did not. The railroad 
industry understandably is not keen on the possibility of being regulated on 
how it determines rail rates. The shipping side of the industry, on the other 
hand, supports a more "fair" and equitable approach to determining rail rates. 
Shippers also support a change to the current process of challenging rates they 
feel are unreasonable.

   On May 15, 2017, the Association of American Railroads (AAR) in their 
opening comments, noted that they have a "strong interest in ensuring that the 
board's rate reasonableness processes do not cause unnecessary delay and 
expense while facilitating analysis based on sound economics consistent with 
the national Rail Transportation Policy." 

   Here is a link to the comments: https://goo.gl/r1iNjN 

   In their comments, the AAR said it continues its long support of efforts by 
the board to "limit the cost and complexity of the Stand Alone Cost ("SAC") 
test as applied by the board while maintaining the economic principles 
underlying the test."

   On June 14, 2017, NGFA submitted reply comments in response to the opening 
comments filed by AAR. "While this proceeding properly focuses on procedural 
improvements to the board's existing processes for adjudicating rate cases, we 
disagree strongly with the AAR's opening comments in which it states that the 
"substantive basis of the board's (rate-challenge) tests does not need 
overhaul," said the NGFA.

   The NGFA, along with other shipper organizations reminded the board that 
many of the inefficiencies and causes of delays associated with the board's 
current rate rules could be alleviated by the board following through on its 
proposals to make changes to the substantive rules it applies to test rate 
reasonableness. The NGFA agreed that the nature of the SAC standard itself is 
the single greatest source of delay in processing SAC cases.

   The NGFA also urged the board to redouble its efforts to change its existing 
standards and methodologies that have rendered futile the pursuit of 
rate-reasonableness challenges by grain and other agricultural shippers. The 
NGFA continues to believe that the Ag Commodity Maximum Rate Methodology it 
proposed in EP 665 (Sub-No. 1) provides a strong basis for developing an 
innovative, objective and comparatively inexpensive rate-challenge methodology. 

   Bob Zelenka, executive director of Minnesota Grain and Feed Association, 
told me that, "The previous process was extremely time-consuming and very 
expensive to pursue. This proposal would streamline the rate challenge process 
and certainly make it more accessible to the smaller captive shipper, which are 
the ones most likely to be facing what could be deemed as an unfair or 
excessive rate." 

   "We believe it is very important for rail users to have access to some 
reasonable recourse, to challenge a rate (and service level) that is deemed as 
unfair, unacceptable or excessive. It is good to finally see the STB become 
more of an advocate for the rail user, which hasn't been the case up until now, 
since the advent of the STB in 1996," added Zelenka.

   It is interesting to note that despite concerns about "high" rates from 
shippers of grain over the years, no such shipper has filed a rate complaint 
with the STB since 1981. Shippers cited some of the reasons were that the 
current formula was arbitrary, too costly and onerous, which discouraged them 
from taking part in the current process. If a shipper feels rates are 
unreasonable compared to others, it has not been cost-effective or easy to 
dispute rates. If you are a rail shipper, it's no secret that rail rates 
continue to creep higher. If you are a farmer, you also know that when rail 
rates creep higher, shipper margins are thinner and that cost is passed on to 
you. 

   The rail rate case issue has actually been under discussion since late 2013. 
Ann Begeman, STB acting chairman, told participants March 19 at the NGFA annual 
convention in New Orleans more than once during her presentation that it is 
important to establish deadlines for cases, saying that "deadlines matter." 
However, she added, "Congress doesn't want us to be moving too quickly on some 
of our more substantive rulemaking proceedings."

   After a near four-year wait and countless comments and revisions, it's time 
for the board to make a final decision on this issue.

   Here is the link to the STB filings where you can view all opening comments 
filed May 15, 2017, and reply comments on June 14, 2017: https://goo.gl/XfBFot 

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

   Follow Mary Kennedy on Twitter @MaryCKenn

******************************************************************************
DDG Prices Firm on Steady Demand

   The DTN average dried distillers grains, or DDG, spot price was up $1 per 
ton from two weeks ago, at $102, for the week ended June 22. Of the 39 
locations from which DTN collects spot prices, 15 bids were $1 to $13 higher, 
seven bids were $2 to $8 lower and the balance of the prices were unchanged. 
The value of DDG relative to corn, based on those bids for the week ended June 
22, was at 78.73%, and the value of DDG relative to soybean meal was at 34.72%. 
The cost per unit of protein for DDG was at $4.08, compared to the cost per 
unit of protein for soybean meal at $6.19.

   One merchandiser said that with ethanol margins weakening, some plants are 
shutting down or reducing run rates. Buyers are looking for product outside 
their areas because their local plants have no offers. Another merchandiser 
said there seems to be a rush to secure feed ahead of the upcoming Fourth of 
July holiday, pushing DDG prices higher this week. Given the weakness in corn 
and soymeal prices the past few days, it is likely DDG prices during the next 
few weeks may move lower once the holiday passes or until ethanol margins 
improve.

   Informa Economics reported most of the trading done this past week for the 
nearby was as a result of uncertainty in the marketplace prior to the 
end-of-the-month planting and stocks report, "causing buyers to be reluctant to 
buy forward in this market environment. If the corn production and yields are 
as expected, the price of DDGs may lose the current support."

   CIF NOLA (New Orleans, Louisiana) dried distillers grains with solubles, or 
DDGS, prices for the week ended June 22 were $132 to $136 for June, and July 
prices were at $127 to $133. Exports have been steady the past few weeks, 
supporting prices.


                               CURRENT    PREVIOUS    CHANGE
COMPANY   STATE                           6/22/017   6/8/2017
Bartlett and Company, Kansas City, MO (816-753-6300)
          Missouri            Dry           $120       $120     $0
                              Modified      $60        $60      $0
CHS, Minneapolis, MN (800-769-1066)
          Illinois            Dry           $105       $105     $0
          Indiana             Dry           $100       $100     $0
          Iowa                Dry           $100       $103     -$3
          Michigan            Dry           $95        $103     -$8
          Minnesota           Dry           $95        $95      $0
          North Dakota        Dry           $105       $105     $0
          New York            Dry           $125       $130     -$5
          South Dakota        Dry           $100       $100     $0
MGP Ingredients, Atchison, KS (800-255-0302 Ext. 5253)
          Kansas              Dry           $103       $100     $3
POET Nutrition, Sioux Falls, SD (888-327-8799)
          Indiana             Dry           $112       $110     $2
          Iowa                Dry           $106       $100     $6
          Michigan            Dry           $109       $108     $1
          Minnesota           Dry           $100       $96      $4
          Missouri            Dry           $125       $112     $13
          Ohio                Dry           $110       $110     $0
          South Dakota        Dry           $99        $96      $3
United BioEnergy, Wichita, KS (316-616-3521)
          Kansas              Dry           $106       $110     -$4
                              Wet           $45        $45      $0
          Illinois            Dry           $108       $114     -$6
          Nebraska            Dry           $106       $110     -$4
                              Wet           $45        $45      $0
U.S. Commodities, Minneapolis, MN (888-293-1640)
          Illinois            Dry           $100       $100     $0
          Indiana             Dry           $95        $95      $0
          Iowa                Dry           $100       $98      $2
          Michigan            Dry           $95        $98      -$3
          Minnesota           Dry           $90        $85      $5
          Nebraska            Dry           $99        $99      $0
          New York            Dry           $125       $125     $0
          North Dakota        Dry           $95        $97      -$2
          Ohio                Dry           $98        $98      $0
          South Dakota        Dry           $90        $90      $0
          Wisconsin           Dry           $98        $98      $0
Valero Energy Corp., San Antonio, TX (402-932-5901)
          Indiana             Dry           $97        $95      $2
          Iowa                Dry           $98        $95      $3
          Minnesota           Dry           $100       $95      $5
          Nebraska            Dry           $100       $97      $3
          Ohio                Dry           $108       $100     $8
          South Dakota        Dry           $90        $85      $5
          California                        $168       $165     $3
Western Milling, Goshen, California (559-302-1074)
          California          Dry           $177       $177     $0
*Prices listed per ton.
          Weekly Average                    $102       $101     $1
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 

   Follow her on Twitter @MaryCKenn

******************************************************************************
From Heavy Winter Snow to Drought in North, South Dakota

   From November 2016 to January 2017, North Dakota had received 47 inches of 
snow, and South Dakota railcars and locomotives were buried in snow. But in 
last week's USDA Crop Progress report, those same areas are now suffering 
through drought conditions.

   In a Jan. 23, 2017, story I wrote titled "Mother Nature Unkind to Grain 
Shippers, End Users, Exporters," I noted that the North Central Research 
Extension Center just south of Minot, North Dakota, reported a total of 47 
inches of snow in four snowfalls since November 2016. In Mobridge, South 
Dakota, BNSF locomotives and railcars were buried in snow. 

   On April 24, 2017, I wrote a story titled "Spring Wheat Planting Off to Slow 
Start in Key States." In this story, I noted that as of April 16, in the 
northern part of the state where large amounts of snow were received this past 
winter, muddy soils still existed, and some isolated areas in northeast North 
Dakota were still experiencing some flooding. Six inches of snow fell in the 
same area as of April 23, and more was expected. Also, most of the western half 
of the state, including Jamestown and north, was under a winter weather 
advisory as of April 24. An elevator manager in the central part of the state 
just north of U.S. Highway 2 told me that, at that time, planting was off to a 
late start, because there was still snowbanks present in the sheltered areas.

   At that time, I would never have expected that, seven weeks later, I would 
be writing a drought story about some of those same areas. On June 8, the U.S. 
Drought Monitor showed that close to 87% of North Dakota and 79% of South 
Dakota was in a drought as of June 6, with conditions having expanded and 
deteriorated compared to last week's report. The worst of the conditions are in 
a swath of central North Dakota that spreads into south-central North Dakota 
and into the north-central area of South Dakota.

   "The drought is here and crops are showing the stress," said Tim Luken 
Manager Oahe Grain, Onida, South Dakota. "Many winter wheat acres have been 
zeroed out by insurance companies and many fields have been sprayed out. 
Producers with livestock are cutting winter wheat and baling it up for feed. 
Last year's seeding of winter wheat in our area was down 15% to 20%, and I 
would be safe to say 50% to 60% of the crop has been either sprayed out or put 
up for feed. Traveling from Gettysburg daily, I am starting to see some of the 
winter wheat in Potter County going backwards also."

   Luken told me that "spring wheat is jointed, and south of here is heading 
out, and by next week will be heading out here in Onida and north. What is seen 
there is not much for tillers and you can row it, which is not good. Spring 
wheat has really seen the effects of the drought and each passing day is 
looking worse all the time. It's still green, but if we don't get any rain 
soon, this crop will be gone also. Each time they talk rain, it builds up and 
just falls apart and we end up with nothing." 

   "We should have no worries about any railroad issues or storage problems 
this year," added Luken.

   "Wheat in western South Dakota has taken a dramatic downturn in the last 
three weeks," said Jerry Cope, a grain marketer for Dakota Mill and Grain, Inc. 
in Rapid City, South Dakota. "The top four" is powder dry, but subsoil isn't 
too bad, and some customers with stripper-head stubble are encountering 
scattered wet spots planting milo and sunflowers. That said, soil moisture 
depletion is increasing day by day. Areas in the center of the state appear the 
worst. Two early May frosts have held grass and hay development down. Hay 
demand has become a home for failing wheat. We are hearing reports of wheat hay 
selling either by the ton or standing in the field that equates to $120 to $150 
per acre returns."

   "This weekend's weather could ruin 60% or more of the spring wheat. Farmers 
with high-protein winter or spring wheat and needing cash are taking advantage 
of the recent rally in futures and basis. Farmers with high-test-weight, 
low-protein wheat in the bin are looking to hold, because the heat brings real 
concerns for test weight but hopefully higher protein. USDA probably has it 
about right for acres and expected production," he added.  

   An elevator manager from near Aberdeen, South Dakota, told me that spring 
wheat in Brown County, South Dakota, will get "disced up" if we don't see rain 
by the weekend, because temperatures in Aberdeen are expected to be 105 degrees 
with 20-mile-per-hour winds on Saturday. Farmers are very concerned about the 
condition of the crop. He told me there has been some really spotty rain over 
the past 10 days, but "this is the epicenter of the drought monitor. I think 
we've had 0.5 inch of rain in calendar year 2017 here at the elevator." 

   North of there, over the border in North Dakota, Mark Rohrich who farms in 
Ashley, North Dakota, told me that, "Some spring wheat is smaller and still 
holding kind of tough, and the earliest-planted wheat is being pushed into 
heading and is drying from the bottom up. We are facing a couple days of 90s 
ahead and no rain. I'm afraid that a lot of the wheat will not even make much 
hay if released." 

   "We had good subsoil moisture to start and small corn and soybeans seem to 
be hanging on," added Rohrich. "Anything seeded in the last two to three weeks 
without any rain has some emergence issues or soybeans laying dry. Sunflowers 
are just emerging, but dried furrows from the heat and lack of moisture for 
pre-emerge chemicals will be the challenge. Farther to the west, like to 
Herreid, South Dakota, and west to the river, I have seen even worse crops than 
here. Grass looks like late September, and I'm not sure what cattle are really 
going to eat out there. Hay will be in short supply and alfalfa looks rough. 
Some may not even get a first cutting."

   Keith Brandt, general manager of Plains, Grain and Agronomy in Enderlin, 
North Dakota, told me that the dry conditions aren't real serious in eastern 
North Dakota. "There has been some rain, and we have good subsoil moisture. 
Enderlin had an inch of rain Tuesday night. Probably only three to four miles 
wide and maybe 20 miles long. We had very good planting conditions this spring. 
High winds have damaged some corn and beans with soil drifting. If the winds 
stop for a few days we are OK. Crops look good to this point."

   Farmers in other parts of North Dakota sent me comments on the drought 
situation where they farm. 

   From Binford, North Dakota: "Pasture and hay crop isn't going to be much 
this year. Subsoil moisture still OK but a nice inch of rain would really help 
now that we've got some heat." 

   From Buchanan, North Dakota: "Not bad here, but getting closer." 

   From Portland, North Dakota: "We could use a shot of rain." 

   From Hope, North Dakota: "Ground moisture is very good around here could use 
rain to wash in chemical and cure up a couple small seeding mistakes."

   Tim Dufault, who farms in the Crookston, Minnesota, area said, "I am on the 
eastern fringe of the drought area. We could use a drink, but it's not dire. 
The crops are small, so they aren't removing moisture like they will a month 
from now. But the hot weather that moved in a week ago is worrisome. We have 
had 80s and 90s with more predicted in the 10-day forecast. That could be 
trouble if we don't get rain to go with it. The dry spring has caused uneven 
emergence in soybeans and dry beans. Stands look tough."

   "April planted spring wheat is holding on; however, anything planted in May 
missed out on most of the soil moisture," said Todd LaPlant, elevator manager 
at EGT, LLC Glasgow, Montana. "Emergence is very spotty and many farmers say if 
we do not see any rain by the weekend, a majority of the crop will be lost. 
With temps in the upper 80s the rest of the week, my thought is we have until 
the 15th before it's done; everything is riding in the six- to seven-day 
outlook. If we miss it, we may see a complete disaster in a five-county region 
of northeast Montana."

   WILL DROUGHT AFFECT PRICES?

   In early February 2008, the drought assessment from the University of 
Nebraska-Lincoln National Drought Mitigation Center (NDMC) showed that 100% of 
the state of North Dakota was experiencing at least abnormally dry conditions, 
with moderate drought present in 55% of the state and the worst drought 
conditions in the southwestern corner and northern third of the state. 
According to North Dakota State University's Soil Science Department at the 
time, "the average precipitation in southwestern North Dakota for the 90-day 
period ending Feb. 7, 2008, was only 24% of normal, making that the worst 
90-day period in the state's history, and long-term precipitation models looked 
unfavorable.

   The Minneapolis HRS wheat futures price reacted to this news, rising every 
trading day, pushing the cash price higher with it. In response to the volatile 
wheat markets, on Feb. 8, 2008, all three exchanges raised the daily trading 
limit in wheat futures to 60 cents per bushel from 30 cents. The limit then 
rose to 90 cents on the next business day and another 50% on each subsequent 
day when two or more contracts in the same crop year closed limit up. By Feb. 
15, the trading limit for the Minneapolis March and May wheat contacts had 
risen to $1.35 per bushel. The Minneapolis Grain Exchange removed the price 
limit on its spot March 2008 contract, starting Feb. 25, 2008. 

   On Feb. 25, 2008, with no limit in place, the Minneapolis March futures 
rallied from its prior day close of $19.25 to $25 before settling at $24. By 
July 29, 2008, the U.S. Drought monitor showed the entire state of North Dakota 
still in a drought, with nearly half of the state in the western portion 
classified as extreme to exceptional.

   This past week, the USDA weekly Crop Progress report showed that, as of June 
4, in North Dakota, topsoil moisture was rated 54% short to very short and 
subsoil moisture was rate 35% in the same condition. In South Dakota, subsoil 
moisture was rated 52% short to very short and topsoil moisture was 54% in the 
same condition. Minneapolis spring wheat futures had been on a steady rise the 
past few weeks, but after the June 6 drought conditions were released, spring 
wheat futures ended the week by climbing to their highest levels in nearly two 
years. For the week, the July contract was up 22 3/4 cents. 

   The HRS spot premiums on the Minneapolis spot market on June 12 were quoted 
as follows delivered Chicago/beyond: 13% proteins were up 30 cents at +70*; 
13.5% proteins were nominally (N) unchanged at +70N to +110N; 14% proteins were 
unchanged at +100; 14.5% proteins were unchanged at +120 and 15% proteins were 
unchanged to up 15 cents at +160 to +175. Since the Memorial Day weekend, the 
DTN Cash HRS Wheat Index has risen 42 cents.

   So, will we see prices reach levels seen in 2008? Going forward, any rain 
that hits the drought areas will push the futures lower, of course, but we 
still have a few months of growing season left for the already struggling 
spring wheat crop. DTN/The Progressive Farmer Senior Ag Meteorologist Bryce 
Anderson said on Monday that, "Forecast precipitation through late July has an 
average of 4 to 6 inches for the Northern Plains -- so that is not a real dry 
trend." My thoughts are that we will likely see a volatile market all the way 
through harvest.

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

   Follow Mary Kennedy on Twitter @MaryCKenn

******************************************************************************
DDG Prices Driven Higher by Rise in Corn Futures

   The DTN average dried distillers grains, or DDG, spot price was up $3 per 
ton from one week ago, at $101, for the week ended June 8. Of the 39 locations 
from which DTN collects spot prices, 22 bids were $2 to $11 higher, and the 
balance of the prices were unchanged.

   One of the main reasons for the rise in the DDG cash price can be attributed 
to the 16-cent per-bushel rally in the corn futures from one week ago. 
Merchandisers said DDG prices began to firm up this week along with the higher 
corn futures and also because of higher meal prices, as a result of prospects 
of hot temperatures during the next few days. If weather concerns continue and 
the potential to reduce yields becomes a factor strengthening corn prices, DDG 
prices will likely continue to move higher in response.

   The current relative distillers dried grains to corn futures is 70%, noted 
Informa Economics. "This is considerably below the three-year June average of 
117% and the five-year June average of 111% because of the reduction in 
exports, mainly China. Historically the relative price of distillers dried 
grains to corn decreases from May to June by about 5%."

   CIF NOLA (New Orleans, Louisiana) dried distillers grains with solubles, or 
DDGS, prices for the week ended June 8 were $132 for June, and July prices were 
at $132 to $128. A merchandiser said CIF NOLA bids and container market bids 
all increased by about $5/ton Thursday. The U.S. Census Bureau reported June 2 
that U.S. exports of DDGS totaled 869,041 metric tons in April, down 2% from a 
year ago. Mexico was the top export destination in April and Turkey was a close 
second, with the two countries accounting for 38% of the total. China was fifth 
on the list, taking just 6% of the total. In the first four months of 2017, 
exports of U.S. DDGS were up 19% from one year ago.


                               CURRENT    PREVIOUS    CHANGE
COMPANY   STATE                           6/8/2017   6/1/2017
Bartlett and Company, Kansas City, MO (816-753-6300)
          Missouri            Dry           $120       $120     $0
                              Modified      $60        $60      $0
CHS, Minneapolis, MN (800-769-1066)
          Illinois            Dry           $105       $95      $10
          Indiana             Dry           $100       $95      $5
          Iowa                Dry           $103       $95      $8
          Michigan            Dry           $103       $92      $11
          Minnesota           Dry           $95        $90      $5
          North Dakota        Dry           $105       $95      $10
          New York            Dry           $130       $120     $10
          South Dakota        Dry           $100       $95      $5
MGP Ingredients, Atchison, KS (800-255-0302 Ext. 5253)
          Kansas              Dry           $100       $96      $4
POET Nutrition, Sioux Falls, SD (888-327-8799)
          Indiana             Dry           $110       $110     $0
          Iowa                Dry           $100       $100     $0
          Michigan            Dry           $108       $108     $0
          Minnesota           Dry           $96        $96      $0
          Missouri            Dry           $112       $112     $0
          Ohio                Dry           $110       $110     $0
          South Dakota        Dry           $96        $96      $0
United BioEnergy, Wichita, KS (316-616-3521)
          Kansas              Dry           $110       $103     $7
                              Wet           $45        $45      $0
          Illinois            Dry           $114       $106     $8
          Nebraska            Dry           $110       $103     $7
                              Wet           $45        $45      $0
U.S. Commodities, Minneapolis, MN (888-293-1640)
          Illinois            Dry           $100       $100     $0
          Indiana             Dry           $95        $90      $5
          Iowa                Dry           $98        $95      $3
          Michigan            Dry           $98        $95      $3
          Minnesota           Dry           $85        $85      $0
          Nebraska            Dry           $99        $99      $0
          New York            Dry           $125       $120     $5
          North Dakota        Dry           $97        $95      $2
          Ohio                Dry           $98        $94      $4
          South Dakota        Dry           $90        $85      $5
          Wisconsin           Dry           $98        $95      $3
Valero Energy Corp., San Antonio, TX (402-932-5901)
          Indiana             Dry           $95        $95      $0
          Iowa                Dry           $95        $90      $5
          Minnesota           Dry           $95        $90      $5
          Nebraska            Dry           $97        $95      $2
          Ohio                Dry           $100       $100     $0
          South Dakota        Dry           $85        $80      $5
          California                        $165       $158     $7
Western Milling, Goshen, California (559-302-1074)
          California          Dry           $177       $170     $7
*Prices listed per ton.
          Weekly Average                    $101       $97      $3
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

   Follow her on Twitter @MaryCKenn

******************************************************************************
Auld Lang Syne 2016-17 Winter Wheat Crop Year

   As the winter wheat crop year came to an end on May 31, 2017, hard red 
winter wheat basis levels tried to stage a comeback from near-historic lows all 
crop year. The DTN National Average Basis chart shows what a rough year it was 
for the HRW wheat basis that hung well below the minimum five-year average for 
the 2016-17 crop year. 

   And, it wasn't just the basis that suffered lower prices. The cash prices 
for the crop year briefly fell below the HRW loan rates for counties in Kansas, 
where loans on 1.96 million bushels of HRW wheat are outstanding, as of April 
30, 2017, according to the May 12 USDA Economic Research Service (ERS) Wheat 
Outlook. 

   As for basis, one would think that due to the lower-protein crop the U.S. 
produced in 2016, the basis would have been stronger throughout the year. The 
2016 crop average protein was 11.2% versus the 2015 crop average of 12.3%. 
However, mills were able to find a way to use the lower protein by blending 
with higher-protein spring wheat or higher-protein old-crop winter wheat. 

   In June of 2016, Dan Maltby, a former HRW buyer in Kansas City and currently 
a consultant for Risk Management Group Minneapolis, told me that "One of the 
things ailing winter wheat is that world wheat production continues to outstrip 
world wheat demand, and U.S. ending stocks bore the brunt of that. Big old-crop 
stocks, widely believed to be 12% pro[tein] will help the 2016 11.2% protein 
crop." This past week, Maltby told me that low protein is getting cheap enough 
to find homes due to very wide Kansas City carrying charges, always at full 
carry, and export prices finally cheap enough to compete with Black Sea. "The 
'good news' about low-protein HRW is that it's cheap and at current prices, 
actually quite competitive on the world market."

   The cheap cash prices were not lost on U.S. wheat farmers, who responded by 
planting fewer acres last fall. USDA estimated in January 2017 that all winter 
wheat seedings were down 10% from the previous year, and if realized, it would 
be the second-smallest U.S. winter wheat acreage on record and the lowest in 
more than 100 years.

   WHAT WILL THE NEW-CROP YEAR BRING FOR PRICES?

   In the May 2017 ERS Wheat Outlook, the report noted that, "Record-low winter 
wheat plantings combined with newly reported harvested area and yield 
forecasts, continue to indicate a sharp decline in winter wheat production. 
Winter production, recently affected by adverse weather in the eastern Plains, 
is projected down 25% from the previous year."

   Mike O'Dea, a risk management consultant at INTL FCStone Inc. in Kansas 
City, Missouri, told me, "The HRW market is now focused on harvest as smaller 
planted acres will see the yields and quality the main feature. Early harvest 
results in Texas and Oklahoma have seen lower proteins, but quality has been 
good with high test weights. But, this has seen the domestic premiums continue 
to stay strong with the KC milling market showing bids for 11 pro at 25 over, 
but 12s at 110 over and 13s at 155 over. This shows how the current market 
structure in place, along with the MGX/KC spread blowing out to +140, should 
continue to keep HRW premiums firm, in theory. But we all know how theory works 
in the grain business."

   "Low-pro HRW does continue to find Gulf business, and the U.S. is 
competitive in the current market environment and should continue to be unless 
we see a significant flat price rally," O'Dea added. "The most interesting 
thing about the export market is the July/August/Sept FOB (free on board -- the 
buyer pays for transportation of the goods) Black Sea values continue to firm; 
basically, the cheapest wheat in the world is moving higher in price. Trade 
will continue to focus on the U.S. Northern Plains and Canadian prairies as a 
smaller U.S. HRS crop will see balance sheets tighten significantly, moving 
back toward carryouts to use that we have not seen since 2007-08, and we all 
know what happened then."   

   I asked O'Dea if he thought the CME decision to implement a variable storage 
rate (VSR) mechanism in its KC March 2018 HRW wheat futures would affect 
prices. He told me he thinks we will see a higher basis this year than last for 
the producer due to the smaller crop. And, unless prices move to levels that 
incentivize the producer to plant more, "Wheat acres will continue to decline 
and VSR will solve itself through smaller overall production and carryouts 
being reduced." 

   "In the long run, we may look back and see the rule of unintended 
consequences being unleashed upon the market as KC will now mirror the CME 
contract in all aspects, which includes the CME storage rate (lower than KC) 
and the harvest storage premium from July through December will go away," he 
added. "Also, we now go to a dynamic environment versus a static one, which 
brings uncertainty; and the one thing the markets do not like is uncertainty. 
We like volatility but not uncertainty, and that is what you get with VSR."

   WEATHER, DISEASE HURT KANSAS NEW CROP

   USDA in January said that HRW winter acreage would be 12% lower from the 
prior year. Since that prediction, a spring blizzard flattened the winter wheat 
crop in western Kansas and the Oklahoma Panhandle over the weekend of April 28. 
Pam Smith, DTN/The Progressive Farmer crops technology editor, attended the 
2017 Wheat Quality Tour, which took place shortly after the blizzard. She noted 
in her final report from the crop tour that, "This year's hard red winter wheat 
tour was a rubbernecker compared to the previous year. The tour estimated total 
production would come in around 382.4 million bushels. Scouts estimated Kansas 
yields will come in at 48.6 bushels per acre. That's a big crop when compared 
to the 35.6 bpa estimate from the 2015 tour and a 37 bpa actual final yield 
last year. However, the crop still has six or more weeks to go and, as scouts 
were continually reminded, a lot of things can happen between here and harvest, 
and most of them are bad." 

   Smith added that the organizers said estimated averages this year might have 
been slightly skewed toward central Kansas since scouts were not always able to 
draw a sample in snow-capped regions. "Also the reduced number of wheat acres 
sometimes made it difficult to actually find a wheat field in some regions," 
Smith wrote.

   USDA NASS reported that, as of May 28, the Kansas winter wheat crop 
condition was rated 9% very poor, 16% poor, 30% fair, 38% good and 7% 
excellent. On top of the damage done by the late-April blizzard, hail in 
northwestern Kansas damaged some of the new-crop wheat during the week ending 
May 28. One year ago, the picture was much brighter with the crop rated 1% very 
poor, 7% poor, 32% fair, 50% good and 10% excellent. 

   If the weather-related damage wasn't enough, the Kansas wheat crop has been 
infected with wheat streak mosaic virus (WSMV). The worst area is in western 
Kansas, according to KSU, and some fields have been abandoned because of the 
disease. WSMV can affect yields and/or will cause the death of the entire crop. 
Kansas Wheat said in an article about the disease that WSMV is "crippling" the 
western Kansas wheat crop.

   DROUGHT RETURNS TO THE NORTHERN PLAINS

   While most people don't think of the Upper Midwest as "winter wheat 
country," those states can play an important part in the overall average of the 
crop quality and protein, especially if the Southern Plains states have a rough 
year as far as protein and quality goes. However, they may not be able to help 
out much this year. 

   NOAA reported that during the week of May 23-30, conditions were quickly 
deteriorating in the Dakotas and eastern Montana. Nearly 25% of North Dakota 
was reported to be in a moderate drought, with the areas where winter wheat is 
grown some of the driest in the state. 

   In South Dakota, a promising crop was downgraded as drought conditions exist 
in the north-central region where rainfall in the last two months is at least 
half of average. As of May 1, USDA estimated only 87% of the 900,000 acres of 
winter wheat previously estimated by NASS that were planted in fall of 2016 in 
South Dakota will still be around by harvest in July. That means the 780,000 
acres estimated to be planted in South Dakota would be the lowest in 46 years.

   But, according to reports this past week of winter wheat acres already being 
zeroed out in South Dakota, that total acreage number will likely not be 
realized. Tim Luken, manager at Oahe Grain in Onida, South Dakota, told me 
that, in the past week, he has heard from farmers that 40% to 60% of the winter 
wheat combined from Pierre, Onida and Harrold has been "sprayed out" 
(terminated) due to poor stands that adjusters had estimated may only yield 5 
to 10 bushels. And that may just be the beginning."

   So, it appears that U.S. new-crop winter wheat acres, already at a 
historical low, may be even lower yet. Given that possibility and the 
possibility of another low-protein crop and maybe poor quality harvested, HRW 
winter basis may have something to look forward to in the new-crop year.

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

   Follow Mary Kennedy on Twitter @MaryCKenn

******************************************************************************
DDG Prices Flat

   The DTN average dried distillers grains, or DDG, spot price was unchanged 
from one week ago, at $97, for the week ended June 1. Of the 39 locations from 
which DTN collects spot prices, six bids were $1 to $5 higher, three bids were 
$2 to $10 lower, and the balance of the prices were unchanged.

   The value of DDG relative to corn, based on those bids for the week ended 
June 1, was at 73.31%, and the value of DDG relative to soybean meal was at 
32.60%. The cost per unit of protein for DDG was at $3.88, compared to the cost 
per unit of protein for soybean meal, at $6.26. 

   Some merchandisers told me that spot prices were soft as the market was 
seeing slow demand this week, possibly due to some end users making sure they 
had enough supply over the long weekend. Runtimes are back to normal now that 
spring maintenance has been completed. End users aren't buying much deferred as 
they anticipate prices may go lower if supplies build. Also, the DDG market is 
faced with competition from other feed ingredients that are as good of a value 
as DDG in rations.

   CIF NOLA (New Orleans, Louisiana) dried distillers grains with solubles, or 
DDGS, prices for the week ended June 1 were $129 to $132 for June, and July 
prices were at $129 to $131. Informa Economics reported that, "Exports from 
September through March are up 6% compared to last year's pace. Exports to 
China for this timeframe are roughly a third of year-ago results. Mexico is the 
largest export market, which has grown 12% compared to last year."

   The U.S. Grains Council (USGC) reported that the prime minister and ag 
minister from Vietnam are currently in the U.S. and will meet with APHIS. At 
issue, of course, is the suspension of U.S. DDGS imports in to Vietnam due to a 
difference of opinion between APHIS and Vietnam's Plant Protection Department 
(PPD) as to what chemical will be acceptable for fumigation. On May 8, 2017, 
the PPD responded to a proposal sent by APHIS on March 23. 

   USGC reported to their members that no confirmation of the lifting of the 
methyl bromide requirement for corn and wheat has been received. "APHIS says 
that the only way to confirm the change is to see an import permit from the 
buyer. If the import permit is silent on fumigation, then APHIS will certify if 
fumigated with Phosphine using either the recirculation system defined in the 
FGIS Fumigation Handbook or the container fumigation procedure as defined for 
containerized DDG. However, until an import permit is received, APHIS cannot 
confirm a change in protocol." DDGS shippers are hoping that the meeting this 
week may bring the situation closer to a solution agreeable to both parties.


                                                CURRENT      PREVIOUS    CHANGE
COMPANY    STATE                                6/1/2017    5/25/2017
Bartlett and Company, Kansas City, MO (816-753-6300)
           Missouri              Dry              $120         $120        $0
                                 Modified         $60          $60         $0
CHS, Minneapolis, MN (800-769-1066)
           Illinois              Dry              $95          $95         $0
           Indiana               Dry              $95          $95         $0
           Iowa                  Dry              $95          $92         $3
           Michigan              Dry              $92          $90         $2
           Minnesota             Dry              $90          $90         $0
           North Dakota          Dry              $95          $90         $5
           New York              Dry              $120         $130       -$10
           South Dakota          Dry              $95          $90         $5
MGP Ingredients, Atchison, KS (800-255-0302 Ext. 5253)
           Kansas                Dry              $96          $98        -$2
POET Nutrition, Sioux Falls, SD (888-327-8799)
           Indiana               Dry              $110         $110        $0
           Iowa                  Dry              $100         $98         $2
           Michigan              Dry              $108         $110       -$2
           Minnesota             Dry              $96          $96         $0
           Missouri              Dry              $112         $112        $0
           Ohio                  Dry              $110         $110        $0
           South Dakota          Dry              $96          $96         $0
United BioEnergy, Wichita, KS (316-616-3521)
           Kansas                Dry              $103         $103        $0
                                 Wet              $45          $45         $0
           Illinois              Dry              $106         $105        $1
           Nebraska              Dry              $103         $103        $0
                                 Wet              $45          $45         $0
U.S. Commodities, Minneapolis, MN (888-293-1640)
           Illinois              Dry              $100         $100        $0
           Indiana               Dry              $90          $90         $0
           Iowa                  Dry              $95          $95         $0
           Michigan              Dry              $95          $95         $0
           Minnesota             Dry              $85          $85         $0
           Nebraska              Dry              $99          $99         $0
           New York              Dry              $120         $120        $0
           North Dakota          Dry              $95          $95         $0
           Ohio                  Dry              $94          $94         $0
           South Dakota          Dry              $85          $85         $0
           Wisconsin             Dry              $95          $95         $0
Valero Energy Corp., San Antonio, TX (402-932-5901)
           Indiana               Dry              $95          $95         $0
           Iowa                  Dry              $90          $90         $0
           Minnesota             Dry              $90          $90         $0
           Nebraska              Dry              $95          $95         $0
           Ohio                  Dry              $100         $100        $0
           South Dakota          Dry              $80          $80         $0
           California                             $158         $160       -$2
Western Milling, Goshen, California (559-302-1074)
           California            Dry              $170         $168        $2
*Prices listed per ton.
           Weekly Average                         $97          $97         $0
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.


                     VALUE OF DDG VS. CORN & SOYBEAN MEAL
                        Settlement Price:   Quote Date      Bushel  Short Ton
                                     Corn       6/2/2017   $3.7275      $133.13
                             Soybean Meal       6/2/2017   $301.90
            DDG Weekly Average Spot Price         $97.00
                                  DDG Value Relative to:    6/1        5/25
                                                    Corn    73.31%       73.55%
                                            Soybean Meal    32.60%       31.83%
                               Cost Per Unit of Protein:
                                                     DDG     $3.88        $3.88
                                            Soybean Meal     $6.26        $6.41
Notes:
Corn and soybean prices take from DTN Market Quotes. DDG price
represents the average spot price from Midwest companies
collected on Thursday afternoons. Soybean meal cost per unit
of protein is cost per ton divided by 47.5. DDG cost per unit
of protein is cost per ton divided by 25.

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

   Follow her on Twitter @MaryCKenn

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

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