Bank Failures & Fed Jitters Will Dominate Trade. The Corn & Ethanol Report 05/03/2023

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., ADP Employment Change at 7:15 A.M., S&P Global Composite PMI Final and S&P Global Service PMI at 8:45 A.M., ISM Services PMI, ISM Services Employment, ISM Services New Orders, ISM Services Prices, and ISM Services Business Activity  at 9:00 A.M., EIA Energy Stocks at 9:30 A.M., 17-Week Bill Auction at 10:30 A.M., Fed Interest Rate Decision at 1:00 P.M., Fed Press Conference, Treasury Refunding Announcement, and Total Vehicle Sales at 1:30 P.M., and Dairy Products Sales at 2:00 P.M.

We wait for the Fed decision on rates and ponder if this banking crisis is as big as 2008 not to mention the debt ceiling hovering over our heads. The Labor Department’s monthly Job Openings and Labor Survey (JOLTs) showed that the number of job openings in the US fell by 384,000 jobs in March to 9.6 million This marked the 3^rd consecutive monthly decline, and compared to a year ago, openings were down 2.44 million jobs or 20% to mark the 8^th straight decline. Job openings declined in the transportation, warehousing, and utility industry, but increased in the educational industry. This is not your previous administrations economy, and yes it is broken.

On the Corn Front the Russians have agreed to meet on Friday in Moscow to discuss the Ukraine Grain Export Corridor Pact and an extension beyond May 18^th. Where and when the meeting would be held has been a moving target in recent days. The last-ditch effort for the corridor extension has been pushed by the UN, but Russia continues to argue that it will not do anything that harms its interest. At the same time US/EU are discussing new economic sanctions that could deepen the political rift. The world is holding its breath for a continued grain export extension, but world exporters are pessimistic as Russia appears to have taken a hard line in negotiations.  According to AgResource’s morning commentary. Corn deliveries are still in limbo as US corn stocks remain higher than our South American counterparts with cheap price corn continued concern over the US banking sector, higher interest rates, US debt ceiling, and better weather forecasted all contributed to getting out of the green and a continuation of red on the screen with a lot of red flags to the economy. The markets are owing us with bells and whistles going off. In the overnight electronic session the July corn is currently trading at 578 which is 2 cents lower. The trading range has been 579 ¼ to 569 ¼.

On the ethanol Front traders will be expecting a turnaround in ethanol production in this week’s EIA Energy Stocks. Corn used for ethanol production March 2023 was in line with expectations, year to date is down 5% from a year ago vs. the USDA forecast of down 1.4%. Usage the last 5 months of month to year will need to exceed the year average of 3.6% to reach the USDA forecast of 5.250 billion bushels. Not an impossible task with ethanol margins high and corn plantings reaching 26% and expected to be well over 50% by mid-May. 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