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 Fed Brainard Speech at 8:05 A.M., Markit Manufacturing PMI Final (FEB) at 8:45 A.M., Construction Spending MoM (JAN), ISM Manufacturing PMI (FEB), ISM Manufacturing Employment (FEB) at 9:00 A.M., Export Inspections at 10:00 A.M., 3-Month & 6-Month Bill Auction at 10:30 A.M., Cotton system, Fats & Oils, And Grain Crushing’s at 2:00 P.M., and Total Vehicle Sales (FEB) at 6:00 P.M.
On the Corn Front we could use some more bullish news after last week’s headlines seemed to be talking the corn market down. The USDA estimates China will import 24 million metric tons of corn from all over the world this year, with some forecasting it could even exceed 30 million. To put that in perspective, China has only imported about 75 (MMT) of corn total over the last 60 years. For the last 6 years, according to www.agweb.com, of the 50 (MMT) of corn the U.S. exports each year. Only 2 (MMT) were sent to China. Farmers and traders will be assessing the thaw and estimate flood concerns in high and low areas and riverbeds. You can bet the mercury turning up is a welcome sign and as we continue, we will be openly talking about corn and soybean acreage going into another year of anticipated high exports. We will definitely have a look at this morning’s Export Inspections data that may whip up some more frenzied buying. In the overnight electronic session, the May corn is currently trading at 550 ½ which is 3 cents higher. The trading has been 554 ¼ to 550 ¼.
On the Ethanol Front I am really waiting for this market to turn to the next chapter. Rumors and/or stories are out there but nothing concrete on China ethanol purchases. And with the EIA continuing to show U.S. ethanol volumes are down due to the pandemic and a host of other reasons mainly that 9-letter word government or in this case 10-letters with governments. The United Kingdom is expanding ethanol blends from E5 to E10 by September. U.S. exports to the U.K. has fallen dramatically in the past decade. In 2011 the U.S. exported 2.8 million barrels to the U.K. In 2020 the U.S. exported 604,000 barrels down from 660,000 barrels in 2019. If the U.K. would need to import to achieve their goals the U.S. market should be more than ready to deliver. The U.K.’s move to E10 comes at a time of a global push to decarbonize the transportation sector and reduce greenhouse gas emissions. There were no trades posted in the overnight electronic session. The April contract settled at 1.729 and is not currently showing any market at this time, although I would expect a little higher, with Open Interest holding at 43 contracts.
On the Crude Oil front, we have the OPEC+ meeting Wednesday and Thursday. We will want to see OPEC and her allies OPEC+ keep the initiative and stay serious about re-balance eyeing production will be supportive. The Texas freeze will reduce global inventories by an additional 50 million barrels, that should further support prices and you can expect West Texas Intermediate (WTI) and Brent Crude will rally off of those numbers. In the Overnight electronic session, the April crude oil is currently trading at 6259 which is 109 points higher. The trading range has been 6292 to 6184.
On the Natural Gas Front milder weather and a production boost could increase March storage. This coming after the week-ended February 19th, second-largest draw on record with a decrease of 338 (BCF). We will be thinking of summertime demand and the prospects of turning the corner on demand destruction with the pandemic before you know it. In the overnight electronic session, the April natural gas is currently trading at 2.797 which is .026 higher. The trading range has been 2.809 to 2.776.
Have A Great Trading Day!