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
Welcome Back Demand!
We kickoff this Thursday before Memorial Day weekend with Export Sales, jobless Claims, 4-Week Average Jobless Claims, Continuing Jobless Claims and Philadelphia Fed Manufacturing Index at 7:30 A.M., Markit Composite PMI Flash (May), Markit Manufacturing PMI Flash (May), Markit Services PMI Flash (May) at 8:45 A.M., Existing Home Sales (MoM-Apr), Existing Home Sales (Apr) Fed Williams Speech and CB Leading Index (Mom-Apr) at 9:00 A.M., EIA Gas storage at 9:30 A.M., 4 & 8-Week Bill auction at 10:30 A.M., Fed Clarida Speech and 10-Year TIPS Auction at 12:00 P.M., Fed Chair Powell Speech and Fed Brainard Speech at 1:30 P.m. followed with the Cold Storage report at 2;00 P.M.
On the corn front the market settled in the red in yesterdays action even after traders saw bargain basement buying in corn and soft winter wheat. The wheat did continue to the upside while the July corn got shy again at looking at the 325 resistance level. There are concerns of the Phase 1 Trade Agreement with China that they will not follow through with terms of the agreement after all fingers are squarely pointing to their country of the origin of the pandemic. The communist regime has the free market wondering if they will purchase more U.S. agriculture products. They already have a surplus of Corn and was a buyer in the U.S. market to save face but as the evidence mounts they have changed their tune and announced they would soon be selling corn from their reserves. Could this be an admission of guilt and/or just thwart hopes of more China buying which explains yesterdays close. This has investors and traders thinking if they are buying time by slowing Phase2 of negotiations in the future? Or did they get caught with their hand in the cookie jar. As we move out of lockdown we should see some more demand but the market with the political and fundamental news is playing possum every time it nears 325. In the overnight electronic session the July corn is currently trading at 319 which is unchanged. The trading range has been 320 to 318 ½ and investors are trying to price in the weather factor at this time which is still early in the season.
On the Ethanol front this market is waiting for more bullish news while producers are doing anything but sit on their hands being forced into idle or shutdown mode. Good news is Ethanol production is up for the third straight week which tells me while we are not hitting on all cylinders the market is making a remarkable comeback with or without trade assurances from China. There were no trades posted in the overnight electronic session. The July contract settled at 1.081 and is currently showing 2 bids @ 1.050 and 2 offers @ 1.115 with Open Interest at 253 contracts. I expect this market to perk up following the lead in the energy complex and grain trade that will witness more growing demand.
On the Crude Oil front the market is toasting and tasting growing demand after the shock to the system with global lockdowns. Heading into Memorial Day weekend the unofficial start to the summer driving season, (but also a perfect gauge), we see a changing of the guard in the contango spread with demand picking up and states loosening lockdowns. In the overnight electronic session the July Crude Oil is currently trading at 3424 which is 75 points higher. The trading range has been 3448 to 3335. Do we dare start talking about $40 a barrel? The way things are shaping up in could be a reality in the not so distant future.
On the Natural Gas front, what can I say? The rest of the Energy complex could not save this part of the complex. With the recent downside crude, ethanol and gasoline faced, plenty of product and nowhere to go. Even if we have hot temperatures we will not have traders chomping at the bit to be buyers This market has seen many rallies fail and do not want to see the same movie again, while bears that made a killing on the downside may be keeping their powder dry for now. We have the EIA Gas Storage today and the Thomson Reuters weekly poll with 17 analysts participating estimate increases ranging from 73 bcf to 97 bcf with the median injection of 83 bcf. This compares to the one-year injection of 110 bcf and the five-year average of build of 93bcf. In the overnight electronic session the June Natural Gas is currently trading at 1.734 which is .037 cents lower. The trading range has been 1.785 to 1.724.
Have a Great Trading Day!
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