Bank Crisis Looms Large In The Energy Complex. The Corn & Ethanol Report 05/02/2023

We kickoff the day with Redbook YoY at 7:55 A.M., Jolt’s Job Openings, Factory Orders MoM, Factory Orders ex Transportation, and Jolt’s Job Quits at 9:00 A.M., API Energy Stocks, LMI Logistic Managers Index Current, and Total Vehicle Sales at 3;30 P.M., and FOMC Meeting Day 1.

On The Corn Front, Our prayers go out to the people involved in the dust storm in Montgomery County, Illinois. This was a brown out much like a white out in a blizzard as heavy winds and no soil moisture allowed the field work with no trees to critically impair visibility and led to the deadly car pileup on I55, having no trees and flat land to consume the highway’s traffic. The aftermath looked like a war zone as cars and trucks piled up causing to semi’s to catch fire.

Models add rain to the Central US Plains with lasting warmth by the weekend. The forecast has wetter trends across the Central Plains and Southern Midwest. A series of frontal events will produce a cumulative rainfall of 2 inches + in Nebraska, The plains, Missouri, Illinois, Kentucky, and Louisiana. Regional seeding delays will be ongoing in North Dakota and Minnesota, but otherwise the outlook leans favorable nearby. Maximum temperatures across the principal Midwest reaching into the upper 60’s and 70’s this weekend, and the pattern of warmth is forecast to continue to May 15^th-16^th. Corn and soybean seedings are expected to surpass 50% by mid-month, which is very important. Water availability will not be an issue outside Southern/Western Plains. Meanwhile, in South America a lasting period of dryness is forecast in Central Brazil  and Argentina, and the arrival of heat next week will accelerate moisture loss. Maximum temperatures in Motto Grosso Do Sal, Southern Mato Grosso and Goias will reach the low to mid 90’s, moisture reserves are present currently across much of Central Brazil, but there is concern over the end of the rainy season in Mato Grosso and portions of Parana. ARC’s work suggest a sizable portion of the crop there must still pollinate. Odds of soaking rain returning beyond mid-May are low. Brazilian corn is cheap, but every ton of production matters in 2023 as yield data continues to point toward a final Argentine crop of 30-32 MMT’s and Ukrainian exports to drop 7-10 MMT’s year-over-year. There is also a dire need for rain in Argentina prior to wheat seeding in the second half of May. In the overnight electronic session the July corn is currently trading at 586 ¼ which is 1 ¾ of a cent higher. The trading range has been 589 to 584 ¼.

On the Ethanol Front rumors are abound the EPA/Biden Administration could delay a decision on eRIN’s that previously announced in December that was to provide new tax credits if electrical vehicles were charged with renewable natural gas or methane (renewable) collected from manure digestors or organic garbage. Legal challenges could push the EPA to delay eRIN decision until future years. The House Energy and Commerce Committee Republications on April 25^th sent a letter to US EPA Administrator Michael Regan urging the agency to reconsider its plan to open the Renewable Fuel Standard to certain sources of renewable electricity. The EPA’s “set” rule aims to establish RFS renewable volume obligations (RVO’s) for 2022/23 and 2024. It also includes a long-awaited provision to allow renewable identification numbers (RIN’s) to be generated for certain types of biodiesel renewable electricity used to fuel vehicles (eRIN’s). The letter led by Reps. Cathy McMorris Rogers (R-WA) and Richard Hudson, (R-NC), encourages the EPA to reconsider its proposal to allow generation of eRIN’s . A full copy of the letter is available on the Energy and Commerce Committee website. There were no trades or open interest in ethanol futures.

Have An Excellent Trading Day!

Dan Flynn

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