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 kick off the day with MBA Mortgage Applications (28/AUG) and MBA 30-Year Mortgage Rate (28/AUG) at 6:00 A.M., ADP Employment Change at 7:15 A.M., ISM New York Index (AUG) at 8:45 A.M., Fed Williams Speech, Factory Orders MoM (JUL) and Factory Orders ex Transportation (JUL) at 9:00 A.M., EIA Energy Stocks at 9:30 A.M., Fed Mester Speech at 11:00 A.M., Fed Kashkari Speech and Beige Book at 1;00 P.M., and Dairy Product Sales at 2:00 P.M.
On the Corn Front the long story continues about bushels per acre. If you do a state by state ratio of good-to-excellent, Iowa’s rating dipped to 45% since derecho became front line news, and lack of rain was just hidden behind other headlines. Now if you compare this rating to other states in the Corn Belt, Illinois’ rating came in at 70%, while Minnesota stands at 79%,, 64% in Nebraska and 80% in Wisconsin. The corn market started off skittish yesterday after the Crop Progress data but manage to close near the highs. Traders will be watching exports, harvest and weather. Funds remain long, which if they decide to liquidate or go parabolic this market will be vulnerable to a free fall. Trade is another issue as farmers and traders are looking at potential buyers. Having some analyst saying there will be plenty of corn, but what or who’s corn will be more attractive to the buyer. And will China buy more U.S. corn to satisfy their purchase agreement on U.S. agriculture products agreed in January. This market has a lot of twists and turns moving into harvest. In overnight electronic session the December corn is currently trading at 355 which is 3 cents lower. The trading range has been 359 ½ to 354 ½.
On the Ethanol Front to no one’s surprise corn use for ethanol is down from a year ago. With plants starting to reopen following the COVID-19 closures, demand is still down from a year ago. The USDA said that 424.370 million bushels were used for alcohol consumption during July and was up 12% from June but 6% below of July 2019. Production of distillers dried grains with solubles came out at 1,864,135 tons, also up 12% for the month but down 6% from a year ago. The USDA expects 5.2 billion bushels of corn to be used this marketing year, which begins shortly, and the September 11th USDA report Crop Production USDA Supply/Demand, hopefully will show a continued up-tic in this industry. John Perkins with Brownfield Ag News provided this information. There were no trades posted in the overnight electronic session. The October contract settled at 1.306 and is currently showing 1 bid @ 1.090 and 2 offers @ 1.350 with Open Interest at 42 contracts.
On the Crude Oil front last night’s API data had draws which came to no one’s surprise with crude stocks down 6.360 million barrels while Cushing, Oklahoma saw draws of 237 thousand barrels, Gasoline was down 5.761 M and Distillates -1.424M. The market seemed aware of these numbers and may have priced them in for the moment. When the market does not have any reaction to draws like these, you would expect a pullback if there was not an initial surge, however, the market did not fail or break into any type of selloff. Todays, EIA data could be another yawner, or the pot can start peculating as we head into a three-day weekend. And I might add, Labor Day Weekend, the last official summer holiday which includes a lot of driving. In the overnight electronic session, the October crude oil is currently trading at 4301 which is 25 points higher. The trading range has been 4321 to 4281.
On the Natural Gas front the October spot contract is taking a beating versus the deferred months. Change in temperatures must be the culprit. No question natural gas is the wave of the future, unless there is another innovative idea to find an alternative and have the infrastructure to mass produce, this commodity is a keeper. In high population cities we have been seeing for over the past decade of vehicles fuelingn on natural gas as a way to have clean and less toxins in the air. And natural gas is what is available and meets all of the standards. In the overnight electronic session, the October natural gas is currently trading at 2.457 which is 7 cents lower. The trading range has been 2.594 to 2.438.
Have A Great Trading Day!