Buckle Up Your Chinstrap. The Corn & Ethanol Report 03/29/2023

We kickoff the day with MBA 30-year Mortgage Rate, MBA Mortgage Market Index, MBA Mortgage Refinance Index, MBA Purchase Index, and MBA Mortgage Applications at 6:00 A.M., Fed Barr Testimony and Pending Home Sales MoM & YoY at 9:00 A.M., EIA Energy Stocks at 9:30 A.M., 2-Year FRN Auction and 17-Week Bill Auction at 10:30 A.M., 7-Year Note Auction at 12:00 P.M., and Dairy Products Sales at 2:00 P.M.

On The Corn Front we had market corrections with soybeans and soybean meal ahead of Friday’s Grain Stocks and Prospective Plantings that will set the tone early in the planting season. We saw most grains higher except old crop corn with short covering. While livestock consolidated with inside days in both cattle & hogs. The $60 thousand dollar question is the decision of farmers to acreage this year. Farmers around the Corn Belt are anticipating a big year with corn, especially with improving soil moisture in corn-deficit areas while cash prices remained strong with corn to ethanol use, it will be interesting what what the Prospective Plantings will show. Michelle Rook with AGWEB quoted Kevin Paap. A Garden City, Minnesota farmer said, “There’s big demand with corn in our area, and we’re seeing the corn basis much more attractive than the soybean basis,” he continued, “corn yields have been maybe a little have been maybe a little better compared with soybeans, so I think corn is going to see the push.” The Prospective Plantings always have a wrinkle, but weather, exports, tar spots, and global demand will sake out the rally to the upside. In the overnight electronic session the May corn is currently trading at 652 ½ which is 5 ¼ cents higher. The trading range has been 653 to 645 ¾.

On the Ethanol Front the USDA’s Commodity Credit Corp. announced on March 20^th that it does expect to purchase and sell sugar under the Feedstock Flexibility Program for crop year 2022, which runs through Oct !, 2022 through September 30, 2023. The CCC is required to announce quarterly estimates of sugar to be purchased for the FFP based on crop consumption forecasts. Under Federal law processors of sugar beets and domestically grown sugarcane can obtain USDA loans when harvest begins. The loans provide interim financing so that commodities can be stored after harvest, when prices are typically low, and be sold later, when prices are higher. When the nine-month loan matures, the processor can repay the loan in full or forfeit the collateral sugar to the USDA. The FFP was reauthorized in a 2018 Farm Bill as an option to avoid for forfeiture. The program encourages the domestic production of certain biofuels from surplus sugar. The USDA sold surplus sugar to bioenergy producers under the program. In its announcement, the CCC said that the USDA’s March 8^th World Agriculture Supply and Demand Estimates report project the crop year 2022 (fiscal year 2023). US ending sugar stocks are unlikely to lead to forfeitures. Therefore, the USDA does not expect to purchase and sell under the FFP on or before July 1^st2023. This makes me sense we will have food shortages because of US ethanol rather than sugarcane. Brazil is pushing away from sugar to corn which has me thinking we will have shortages in both corn & ethanol. There were no trades or open interest in ethanol futures.

Have A Great Trading Day!

Dan Flynn

Questions? Ask Dan Flynn today at 312-264-4374