The Distillers market remains elevated compared to where we were as of March. While the market remains high, we are seeing a slight softening as we start to close out May. This softness is due to the downturn in corn prices since May 13. Also, the export demand for Distillers has weakened so I expect Distillers to follow corn tighter, which would not be the case if export demand was strong.
Like other fertilizer markets, the Urea market has been trading higher most of this year. The U.S. market was at a premium for the first half of this quarter and import volumes reflected that. As we get through planting season and demand begins to weaken, I expect to see prices soften up. Just how much softening occurs will be determined by the level of imports we see between now and the end of Q3.
The Wheat Midds market has two factors that concern me going forward. First, there’s the statement by China that they will look to substitute wheat for conventional feed grains (corn and sorghum or milo). The substitution rate could be as high as 30%. If we continue to see corn prices drop, then it will be interesting to see whether the Chinese stick to this decision. The other factor that concerns me: We may see greater use of Midds in the U.S. by farmers in an attempt to lower diet costs.
Actionable Insights: For Distillers and Wheat Midds, follow the corn market, which should provide good insight on the Distillers market and possibly the Wheat Midds market. For Urea, follow the level of imports between now and Q3 for insight into whether we will see this market soften up during the second half of Q3.