Flash Crash in Crude Oil Overnight Market. The Corn & Ethanol Report 05/04/2023

We kickoff the day with Challenger Job Cuts at 6:00 A.M., Export sales, Balance of Trade, Unit Labour Costs QoQ Prel, Nonfarm Productivity QoQ Prel, Exports, Imports, Initial Jobless Claims, Jobless Claims 4-Week Average, and Continuing Jobless Claims at 7:30 A.M., NY Fed Treasury Purchases TIPS 1 to 7.5 years and EIA Natural Gas Storage at 9:30 A.M., and 4-Week & 8-Week Bill Auction at 10:30 A.M.

On the Corn Front AgResources reports weather models extract rain from the Southern/Western Plains and regional planting delays returning to the Central Plains and Southern Midwest. The US forecast has trended drier in Texas, Oklahoma, Western Kansas, and Colorado but is consistent with prior runs. A welcomed warming trend expands into the heart of the Midwest in the next 48 hours, and widespread dryness into the weekend allows row crop seeding progress to accelerate. A much more active pattern of showers follows May 7^th-13^th, with excessive rainfall probable in South Dakota, Minnesota, Wisconsin and much of the far southern Midwest. The CBOT corn futures traded higher as July was unable to press to new lows and the market is beginning the process of scoring a hey reversal. Strength in yesterday’s action was primarily news that unconfirmed accounts that the Ukraine shot drones into Moscow to kill Putin. I believe highly unlikely with scheduled talks in Moscow of the grain corridor were scheduled. This export corridor appears unlikely to be extended in tomorrows schedule meeting, if they meet at all.  The corridor extension looks dead in the water. The corridor is a bigger deal for corn in the long run as there’s no way to match the maritime shipments if Ukrainian exports are confined to overland movement via eastern Europe. As we said before, lingering in the backround is a sharp decline in combined Argentine and Ukrainian exports for calendar year 2023. Heat and dryness persists in Central Brazil the next 10-days with no signs of drought ending in Argentina. The EU & GFS weather models have also eliminated rain chances from Mato Grosso do Sul and Parana the next 10 days, and the pattern of heat, dryness and rapid soil moisture loss is most probable. Long-range climate models continue to suggest above-normal precipitation in Central Brazil throughout the month of May, but better-performing operational models have yet to show this pattern change. Brazilian dryness in May isn’t unheard of but maximum temperatures in the low/mis 90’s (3 to 6 degrees warmer than normal) will accelerate moisture loss. In the overnight electronic session the July corn is currently trading at 585 ¼ which is 3 ¼ cents higher. The trading range has been 592 to 585.

On the Ethanol Front US ethanol stocks are in rapid seasonal decline. A measurable increase in weekly production usually occurs by mid-May. The stocks slipped to 23.4 million barrels, the lowest level in 5-months. Implied gasoline demand plunged 9.4% last week and was down 2,7% from a year ago. Analysts expect a 25-50 million bushel reduction in the current USDA corn usage for ethanol forecast of 5.250  billion bushels in next Friday’s WASDE report. Ethanol production rose to 976 million barrels a day (mbd), up from 963 mbd the previous week. 98 billion bushels of corn for ethanol use in the production process, well below the pace needed to reach the USDA forecast for the 9^th consecutive week. 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