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 the day with Corporate Profits QoQ Final (Q3), GDP Price Index QoQ Final (Q3), GDP Growth Rate QoQ Final (Q3), PCE Price QoQ Final (Q3), Core prices (Q3) at 7:30 A.M., Redbook MoM (19/Dec) and Redbook YoY (19/Dec) at 7:55 A.M., CB Consumer Confidence (DEC), Existing Home Sales MoM (DEC), and Richmond Fed Manufacturing Index (DEC) at 9:00 A.M., 119-Day and 42-Day Bill Auction at 10:30 A.M., 5-Year TIPS Auction at 12:00 P.M., and API Energy Stocks at 3:30 P.M.
Sunday night was a cruel start to the week and the market followed through making new lows on Monday. When the initial shock of traders, trading on fear the outside markets poised a comeback except for copper being very weak throughout the trading session. Much needed rains in South America did move in but did not have the coverage or as plentiful in the real needed acres or regions farmers were hoping for. Almost all of the markets in the grain complex mounted a comeback with soybeans leading the way. With pollination beginning in South America, January and February will be crucial to their 2021 crops, while U.S. exports remain strong and especially big numbers already for 2021 exports, with U.S. exports the cheapest game in town currently. After we get through February for Brazil and Argentina’s crop estimates we will be talking and looking towards U.S. plantings with the usual switchovers between corn and soybeans, but farmers and traders watch the Drought Monitor Index. In the overnight electronic session, the March corn is currently trading at 439 ½ which is a ½ of a cent lower. The trading range has been 441 ½ to 437 ¼.
On the Ethanol Front we are having ethanol stocks pile up as plants are producing ethanol as a byproduct now. Peter Meyer of S&P Global Platts said,” Ethanol plants are selling a lot of their byproducts given the rise in soybean oil prices which were somewhat based on Palm oil prices going up, so you have corn oil in demand, and there’s a need for carbon dioxide for all the dry ice needed to move vaccines.” Meyer also said, there are only about 30 ethanol plants with a capability to capture carbon dioxide for resale. But the other product in demand: DDGs, “Then you have DDGs, which there is really a high demand for right now,” added Meyer. “Your cattle numbers have been flat the last four or five years, but the hog numbers keep going up. So, there is a demand for feed.” This why we saw ethanol companies stock prices rise in yesterday’s action and the January ethanol futures settle .005 higher amid all the chaos in the market yesterday. There were no trades posted in the overnight electronic session. The January contract settled at 1.325 and is currently showing 1 bid @ 1.100 and 1 offer @ 1.500 with Open interest at 32 contracts.
On the Crude Oil Front demand seems to be waning, but it is just the fear of it, as the coronavirus spreads fear like wildfire, just like it’s patients. Also, Russia chimed in yesterday and wants OPEC+ to boost production another 50,000 bpd in February. Stories are breaking that crude oil could be the play of 2021, even after all the talk about ethanol and natural gas. Russia may be careful about what they wish for, there may be a new sheriff in town in an underexplored part of Africa, that has gotten the supermajors attention. It has been called the final frontier of onshore drilling in the Kavango Basin., Recon Energy Africa owns the entire Kavango Basin in Northeastern Namibia and Northwestern Botswana. The land position is now almost the size of Switzerland which could rival the Texas Permian Basin. With nods coming in from all sides – geologist, geochemists and investors Recon scooped all the land up and could transform this region forever. In the overnight electronic session, the February crude oil is currently trading at 4727 which is 70 points lower. The trading range has been 4796 to 4660.
On the Natural Gas Front prices are edging higher above resistance with cold weather forecasted in the lower 48 and the Winter Solstice had the longest night of the year and temps have been unforgiving at night. We are in the process of witnessing the biggest pursuits to capture this market globally, with China and Iran being 2 of the countries. The U.S. has the edge for now in price and production. In the overnight electronic session, the January natural gas is currently trading at 2.775 which is 7 cents higher. The trading range has been 2.778 to 2.690.
Have A Great Trading Day!