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 start off with a slow day for reports with the Baker Hughes Oil Rig Count and Total Rig Count at 12:00 P.M. and Cattle on Feed at 2:00 P.M. and that’s all folks.
On the Corn front it looks like the market technically failed and fundamental news is not helping with rising tensions we are having with China. We traded lower with commercial hedging after farmers booked sales of old crop. They are literally getting what they can for it now as they look ahead to this years crop which is expected to be a bin-buster. The move was made that holding out any longer could stymie prices further as forecast for the crop is good with warmer temperatures. Also China is auctioning off 4 million metric tons of corn in their reserves. Another wild-card with rising tensions between Beijing and Washington is will the trade deal continue. So we have a lot of factors pushing this market down. Secretary of State Mike Pompeo gave China a shot, saying the $2 billion pledged by China to fight the pandemic as “paltry.” Not even to mention the major disagreement on Intellectual Property (IP) only adds to the nerves about exports. Pretty quiet trade in the overnight electronic session with the July Corn currently trading at 316 ½ which is 1 ¼ of a cent lower. The trading range has been 318 ¼ to 316.
On the Ethanol front Rhiannon Branch wrote a story of what the futures hold for ethanol speaking with some in the industry. We are starting to see production climbing slowly as plants begin to recover from the COVID-19 losses. Eric Moseby is General Manager of Lincolnland Agri Energy in Palastine, Illinois. He says it will be interesting to see how the industry responds throughout the recovery process. “ We will come back and blow right through those production numbers and increase stocks only to crash the profit margin? Or will we take a more measured approach ? I am hoping for the latter.” Mr. Moseby must be using Natural Gas as a model with an ungodly amount of surplus and nowhere to go. University of Illinois as economist Todd Hubbs says the pandemic demolished the good ethanol production and corn use numbers producers had coming into 2020. He says the April use for ethanol that the USDA will report on will be a “real shocker” but expects the numbers to build back up in May. “When we think about where the ethanol is headed. I think we may have seen the worst of it. Barring some kind of rekindling of the pandemic. I think we are going to build and strengthen.” While Moseby said he thinks there will be growth for higher ethanol blends eventually, but it could be a long slow road as they make up for export and demand losses. There were no trades posted in the overnight electronic session. The July contract settled at 1.109 with the market currently showing 2 bids @ 1.055 and 2 offers @ 1.130 with Open Interest at 262 contracts.
On the Crude Oil front everyone was raving about the stark comeback and mighty rally. But even after bullish inventory numbers traders decided it was healthy to start taking kids of the street and profit raking 101 here we come. We our seeing wild trading range in the overnight action as we have seen a continuation of profit taking but the wide range tells me we could actually have a higher 1:30 P.M. close. In the overnight electronic session the July Crude Oil is currently trading at 3273 which is 119 points lower. The trading range has been 3400 to 3272.
On the Natural Gas front the market is currently trading higher but in sessions past, the question is…” Will it hold?” Warmer temperatures are called for and the 30-90 day weather forecast calls for at or above normal temperatures which could help somewhat sustain a mini rally. In the overnight electronic session the June contract is currently trading at 1.715 which is .005 higher. The trading range has been 1.729 to 1.680.
Thanks and Have a Great Trading Day!
Have a Blessed Memorial Day!Questions? Ask Dan Flynn today at 312-264-4374