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 MBA Mortgage Applications (19/FEB), MBA 30-Year Mortgage Rate (19/FEB) at 6:00 A.M., Fed Chair Powell Testimony, New Home Sales MoM (JAN), and New Home Sales (JAN) at 9:00 A.M., Fed Brainard Speech and EIA Energy Stocks at 9:30 A.M., 2-Year FRN Auction at 10:30 A.M., Fed Clarida Speech and 5-Year Note Auction at 12:00 P.M., and Dairy Products Sales at 2:00 P.M.
Fed Chair Jerome Powell made it clear on Tuesday that the Federal Reserve will keep its interest rates near zero for the foreseeable future. Testifying to a Senate Panel, Powell said “the economy is a long way from our employment and inflation goals.” As a result, The Fed will continue its easy money policy and continue its huge bond-buying program until, “substantial further progress has been made, and that is likely to take time to achieve.”
On the Corn Front the thaw is coming and we will be watching flood zones and rivers closely. It will be good to talk about plantings again like MLB is back at spring training. USDA chief economist Seth Meyer projects $4.20 corn. “We’re looking at how you clear a balance sheet next year,” says Meyer, “When you look at things like the futures market, there is always weather risk in those markets and other things. When we look at this, it’s conditioned on that 92 million acres and a normal harvesting rate and a normal weather yield. So, the futures market may show a greater amount of risk in that position.” Those were well laid out points but for the moment I believe they undershot what the actual will be.
On the Ethanol Front we have slow times and the same stories. The EPA changes stand and is siding with the ethanol industry. The futures are slow, and productivity must increase in the cash market to get this market going again. No recent news on China’s interest to purchase U.S. ethanol at these prices.
On the Crude Oil Front a robust recovery in demand from the Covid-19 pandemic had banks and traders projecting further oil price gains. Saudi Arabia and Russia are heading into an OPEC+ meeting March 3rd and 4th. The Kingdom wants to hold output to steady in April, while Moscow wants to proceed with an increase. The OPEC+ decision looms a major risk event for the oil market,” Stephen Brennock, an analyst with PVM Oil Associates. Yet Prices, “are still expected to stay on a bullish trend,” he continued. I just hope this is not a chink in the armor and the beginning of wide-spread cheating on production. It has before, and we have to keep this market in re-balance.
On the Natural Gas Front a warmer forecast here have not been great to the market. Or skyrocketing bills that come in when local governments lack of attention to detail and leave the barnyard door wide open for such a tragedy that did not have to take place with short sighted on infrastructure, when to continue and what is going to happen if we stop here? Every time the government top-to-bottom Pontificates a newer better energy source, (It’s like “Play is again Sam!”) The new product is worse and has plenty of holes in it.
Have A Great Trading Day!