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 “it feels like spring” morning with Export Sales and Jobless Claims at 7:30 A.M., EIA Gas Storage at 9:30 A.M., 4-Week & 8-Week Bill Auction at 10:30 A.M., Fed Kashkari Speech at 12:00 P.M. followed by Fed Kaplan Speech at 5:00 P.M. As we brace for the Jobs number we must remember and take in account the growth we have seen in the last three years and how the COVID-19 pandemic is mimicking how fast these can go that we brought back home. Today is LAST TRADING DAY for all May grains.
On the Corn front analyst predictions of $2.60 corn is not far-fetched as we got our first dose of how big of a U.S. corn crop farmers are producing, Tyne Morgan with AGWEB Farm Journal wrote. At 3.3 billion bushels, that’s the largest stocks seen since the 1980’s. University of Missouri economist Seth Meyer said, Tuesday’s report wasn’t a shock to the market. “The crop production numbers were not a surprise, as historically, unless there significant evidence to the contrary, like last year. They take the prospective plantings from March, and they’re ‘weather-adjusted yields’ so the production side should have been exactly as folks expected,” he said. Chip Nellinger, with Blue Reef Agri-marketing, said the USDA’s May WASDE report was a relief, as the market got some answers. He went on to say the market now knows where initial demand and carryout projections are for the new crop. “The market will use variables like how fast the rest of the crop gets planted, growing season weather, pollination and grain-fill conditions and future demand information to gauge possible ending stocks changes going forward and thus price adjustments,” Nellinger says. While the supply situation seems to be growing, one key piece of the puzzle is demand. We see welcome and new countries participating and purchasing the U.S. crop. We must consider in the current political environment, will China honor their Phase 1 commitment to purchase U.S. agriculture products? Brian Splitt with AgMarket.net had a very good synopsis, he said, the May WASDE report gave the market one very important reminder: demand has to be consistent in order to keep a bad situation from getting worse. In yesterday’s action we had a weak close on the July corn settling at 318 ¼ which was down 4 cents. In the overnight electronic session the July Corn is currently trading at 317 ½ which is ¾ of a cent lower. The trading range has been 318 ¾ to 317.
On the ethanol front Isis Almeida with Bloomberg reported, Andersons CEO Pat Bowe said operations resumed at the Albion, Michigan and Dennison, Iowa plants at a presentation to a BMO virtual conference. The key points for this move are an increase of gasoline demand recently allows for some capacity to come back online. The company also sees 2nd quarter across its 5 plants at 50% of capacity with the company shut its five plants for extended maintenance earlier. Investors are banking on many factors, favor of government support for the ethanol industry, while Andersons company awaits legislation. Expectations are Ethanol recovery will be slow, but Andersons expect a “bin-busting” U.S. Corn crop, which should help the company’s revenue. There were no trades posted in the overnight electronic session. The July contract settled at 1.118 and the market is currently showing 5 bids @ 1.075 and 5 offers 2 1.114. It looks like there is no one biting and Open Interest is at 263 contracts.
On the Crude Oil front it seems we are in re-balancing phase and the sooner we open shops up the better demand will be. As the weather turns I see more foot traffic with more cars and trucks on the road as well. We have continuing production cuts as the producing countries know it is in their best interest to cut and not upset the apple cart. They received an education of what you reap you sow. It is also time for are local governments to stop arbitrary and capricious rules as the Emergency Powers Act is not indefinite. In the overnight electronic session the July Crude Oil is currently trading at 2643 which is 75 points higher. The trading range has been 2712 to 2556.
On the natural Gas front we have the EIA Gas storage report at 9:30 A.M. and the Thomson Reuters weekly poll with 19 analyst participating estimate increases ranging from 98 bcf to 115 bcf with the median injection of 107 bcf. This compares to the one-year injection of 101 bcf and the five-year average build of 87 bcf. In the overnight electronic session the June natural gas is currently the June contract is currently trading at 1.626 which is 1 cent higher. The trading range has been 1.652 to 1.610.
Have a Great Trading Day!