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 the day with Redbook MoM and YoY for June at 7:55 A.M., Market Composite PMI Flash, Market Manufacturing PMI Flash and Market Services PMI Flash for June at 8:45 A.M., New Home Sales and Richmond Fed Manufacturing Index at 9:00 A.M., 119-Day and 42-Day Bill Auction at 10:30 A.M., 2-Year Note Auction and 273-Day Bill Auction at 12:00 P.M., followed with API Energy Stocks at 3:30 P.M.
On the Corn front we dropped to 3-week lows as the USDA’s Crop Progress good to excellent rating rose to 72% with many analysts expecting a drop of 1% and the rating rose 1%. President Trump also reassured investors by saying the China trade deal was still intact, after comments by his trade advisor Peter Navarro spooked the markets by suggesting the trade deal was “over.” After President Trumps comment and Mr. Navarro back tracked on his comments the market took off and never looked back. We expect to see more pressure on the grain markets for now which is all weather related. In the overnight electronic session the July Corn is currently trading at 326 which is 2 ¼ cents lower. The trading range has been 327 ½ to 321 ¼.
On the Ethanol front a report from CoBanks Knowledge Exchange said the ethanol industry will have to diversify itself in the future. The report also said that excess production capacity and reduced demand will force the U.S. ethanol industry to, “transform its business model to create more value and improve its operational efficiency.” CoBank predicts that consolidation within the companies will lead to longer and more financially stable companies with diversified ethanol co-product offerings by 2025. “While ethanol remains an attractive business with long-term potential, the industry will need to evolve and diversify beyond fuel ethanol,” says Kenneth Zuckerberg, CoBank lead grain and farm supply economist. “That diversity will need to include higher-margin co-products like high protein distillers grains for animal feed, liquid carbon dioxcide for refrigeration, beverage grade alcohol and other industrial products. With the demand destruction we witnessed beginning in March, and now we are seeing people getting out and driving with some going back to work we are seeing a light at the end of the tunnel. There were no trades posted in the overnight electronic session. The July contract settled at 1.260 and is currently showing 1 bid @ 1.192 and 2 offers @ 1.270 with Open Interest dropping to 46 contracts.
On the Crude Oil front the market is rolling along as we are getting as close to back to normal as can be. We will see an impact of the summer driving season as well with people moving and shaking and the improving economy rolling like a juggernaut. In the overnight electronic session the August Crude Oil is currently trading at 4124 which is 51 points higher. The trading range has been 4163 to 3976.
On the Natural Gas front the Trump administration finalized on Friday, regulations to allow for the rail shipment of LNG, a flammable and odorless liquid that is a key energy source for the United States. The move has been opposed by 15 states due to the potential hazards of transport by rail lines. U.S. Transportation Secretary Elaine Chao claims ne safeguards will prevent any dangerous accidents. The key operational safeguards will require tank cars to be outfitted with “an enhanced thicker carbon steel outer tank,” and improved braking. It is also requiring “remote monitoring of the pressure and location of LNG tank cars.” In the overnight electronic session the July Natural Gas is currently trading at 1.647 which is .017 lower. The trading range has been 1.663 to 1.635.
Have A Great Trading Day!