Dan Flynn is the writer of The Corn & Ethanol Report, a daily market letter covering grains, energies, and various global issues that are the driving force and backbone of the commodity markets. Contact Mr. Flynn at (312) 264-4374
We kickoff this morning with MBA Mortgage Applications and MBA 30-Year Mortgage Rate at 6:00 A.M., Producer Price Index (PPI) at 7;30 A.M., Fed Chair Powell testimony at 8:00 A.M., EIA Energy Stocks at 9:30 A.M.,
U.S.30-Year Bond Auction at 12:00 P.M. and Dairy Product Sales at 2:00 P.M..
On the Corn front yesterday’s WASDE data estimate U.S. feed-grain outlook for 2020/21 is for record high production and domestic use, greater exports and larger ending stocks. The corn crop is projected at a record 16.0 billion bushels, up from last year on increased area and return to trend yield. The yield production of 178.5 bushels per acre is based on a weather adjusted trend assuming normal planting progress and summer growing season weather, estimated using the 1988-2019 time period. Despite beginning stocks that are down slightly from a year ago, total corn supplies are forecast for a record high at 18.1 billion bushels. Total U.S. corn use in 2020/21 is forecast to rise relative to a year ago with increases for domestic use and exports. Food, seed and industrial (FSI) use is projected to rise 245 million bushels to 6.6 billion. Corn use for ethanol is projected to increase from the current pandemic levels based on expectations of a rebound in gasoline consumption. Sorghum FSI for 2020/21 is lower as expectations of increased sorghum import demand from China reduce available domestic supplies. Corn feed and residual use is projected higher mostly reflecting a larger crop and lower expected prices. U.S. market share is expected to increase from the 2019/20 multi-year low, but remains below the average level seen during 2015/16 to 2019/20 with expected competition from Argentina, Brazil and the Ukraine. The USDA old crop ending stocks were raised to 6 million bushels to 2.098 billion bushels but well below analysts expectations which was due to larger export and feed use assumptions. New crop production was above estimates at 15.995 billion bushels and new crop carryout is forecasted at 3.318 billion bushels, which is also below estimates. South American old crop production was unchanged. CONAB raised Brazil’s second corn crop forecast by 0.4 MMT for MY production total to 102.3bb. In the overnight electronic session the July Corn is currently trading at 320 ¾ which is 1 ½ of a cent lower. The trading range has been 322 to 319 ½.
On the Ethanol front Todd Neeley with DTN reports since the economic shutdown, about 130 ethanol plants have either fully or partially idled operations with swooning demand in gasoline. The Renewable Fuels Association, Growth Energy, National Biodiesel Board, American Farm Bureau Federation, National Corn Growers Association, American Soybean Association, National Farmers Union, National Oil seed Processors Association, National Renderers Association, National Sorghum Producers and Fuels America, sent a letter to House Speaker Nancy Pelosi and senate majority Leader Mitch Mc Connell on Monday to detail industry concerns. “The situation is dire,” the groups said in a letter. “More than 130 biofuel plants have already partially or fully shutdown as motor fuel demand has plunged to 50-year lows. America’s biofuel plants purchase annually more than one-third of U.S. Corn and Soybean Oil, and that loss of those markets has depressed farm income and will continue to push corn and soybean prices down dramatically. The recently passed CARES Act provided some loans to producers but not specific relief for biofuel companies. In addition the USDA’s approval of using Commodity Credit Corporation funds to help agriculture but provided nothing to biofuels. There were no trades posted in the overnight electronic session. The July contract settled at 1.102 and is currently showing a wide spread with 1 bid @ 1.050 and 1 offer @ 1.140 with Open Interest at 267 contracts.
On the Crude Oil front I just keep hearing more and more production cuts with all parties onboard. I believe the warring factions on production cuts were to destroy the U.S. shale industry. They may have finally realized that they only opened up Pandora’s Box. Last nights API showed builds in Crude Oil at 7.58 million barrels, Distillates had builds of 4.712 million and Mogas had draws of 1.911. In the overnight electronic session the July Crude Oil is currently trading at 2638 which is 5 tics higher. The trading range has been 2652 to 2553.
On the Natural Gas front the market is reversing off the lows in the overnight electronic session with New England getting 4 inches of snow last night and forecast in the northeast are still up for grabs. While the Midwest is forecasted for wet and warmer more seasonable weather. The question is, how long will the northeast have to contend with abnormal spring weather and when will they get relief? In the overnight electronic session the June Natural Gas is currently trading at 1.714 which is .006 lower. The trading range has been 1.718 to 1.664.
Have a Great Trading Day!