Bidenomics & Inflation Nation Not Adding Up. The Corn & Ethanol Report 11/28/2023

We kickoff the day with Redbook YoY at 7:55 A.m., S&P/Case-Shiller Home Price MoM & YoY, House Price Index, and House Price Index at 8:00 A.M., CB Consumer Confidence, Fed Goolsbee Speech, Richmond Fed Manufacturing Index, Richmond Fed Manufacturing Shipments Index, and Richmond Fed Services Index at 9:00 A.M., Fed Waller Speech at 9:05 A.M., Dallas Fed Services Index and Dallas Fed Services Revenues Index at 9:30 A.m., Fed Bowman Speech at 9:45 A.m., 52-Week Bill Auction at 10;30 A.M., Fed Barr Speech at 12:05 P.M., and Fed Barr Speech at 2:30 P.m., and API Energy Stocks at 3:30 P.M. Also, Phil Flynn will be a guest speaker at the Investment Masters Symposium at the Hyatt Regency Sarasota December 4-6.

The Economic Research Division of the USDA released their estimates for national average crop production costs for the upcoming 2023/24 crop at the month. As expected, total costs projections were lower for both corn and soybean crops, with corn cost making the largest decline. For corn producers, energy costs are expected to see the largest increase of $1.53/acre. But this increase is more than offset by sharp declines in fertilizer and seed. The USDA estimated a national corn fertilizer cost of $45/acre, down nearly $27 from last year and the lowest in 3 years. Seed costs are expected to decline $5/acre to $56, Despite rising interest rates, interest on operational capital is expected to decline due to lower capital requirements. Total operating costs are projected to decline by nearly $30/acre, while overhead costs are forecast ti increase $2/acre. At the bottom line, total corn costs are estimated at $870/acre on a national average basis. Cost for both crops will be the 3^rd highest on record. While production cost for both crops are down from a year ago, new crop futures are lower. ARC has charted uses of the February crop insurance base prices and assumes trend yields to calculate met returns. New crop corn futures today are $87/Bu less than a year ago, and November soybeans are $.96/Bu cheaper. The decline in sales prices far exceeds the decline in production costs, and expected returns for next year are lower in both crops, but still profitable and still historically good. The national average expected return on corn production today is near $107/acre, down from $218 last year. Soybean returns are estimated at $96/acre vs. $143/acre a year ago. Again, these are expected return calculations (not actual), which provide a snapshot of expected profitability ahead of the planting season. Those are figures that growers are looking at while making planting decisions for the year ahead. A year ago, expected corn returns offered a $75/acre advantage over soybeans, and US farmers responded by boosting corn acres by 6.3 Mil and reducing soybean acres by 3.9 Mil. This year the corn advantage is just $11/acre, which should shift acres to soybeans in 2024. Remember Thursday December 30^th is First Notice Day on all December CBOT futures, it is never to early to roll. Funds added to their heavy short position as corn and wheat are pushing contract lows. On the Brazil weather front another round of improved rain chances occurs thereafter Dec 4-6, but it is critical that this shift is pulled forward into the 7-day forecast. The GFS also allows a pattern of below-normal rainfall to return to Central and Northern Brazil in the 11-15 day period. The erratic nature of Brazil’s monsoon remains a concern as key soybean growth stages are just ahead. AGResource’s Brazilian team will begin touring major producing states in December to better measure the chance crops can recover if regular/soaking rain develops in the second half of the growing season. Rainfall is demanded and required for the trendline corn yields. In the overnight electronic session the December corn is currently trading at 456 ¼ which is ¾ of a cent higher. The trading range has been 456 ¾ to 455.

On the Ethanol Front Erin Voegele with Ethanol Producer magazine reports Sen. Pete Ricketts (R-Neb) on November 24^th called on the Biden administration to finalize rule making that would allow E15 to be sold year-round in Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin. Several Midwestern governors in Aprill 2022 filed petitions with the US EPA requesting the agency remove that 1 – psi Reid Vapor Pressure (RVP) waiver for summer gasoline-ethanol blended fuels. Which would effectively allow E15 to be sold year-round within their states. The EPA released a proposed rule to implement the requested change in February 2023. A comment period on the proposed rule was open through April 20. The EPA, however, has failed to finalize the ptoposal. According to documents posted to the EPA’s website, the agency has received 16 petitions, primarily from oil groups and 2 state governors, asking for the implementation of the Midwest E15 petitions to be delayed. Several of those petitions, including those filed by Arkansas Gov. Sarah Huckabee Sanders, Superior Refining, Phillips 66, CountryMark, Yesway, and HF Sinclair have been filed since Oct.1. The petitions claim that approval of the Midwest E15 petitions would negatively impact gasoline supplies and increase fuel costs. Several media reports published in mid-November indicate that the Biden administration is stalling action on the Midwest E15 petitions. Ricketts on Nov. 24 released a statement in response to those reports. “the Biden administration needs to follow the law and keep their commitments for this summer,” he said. “President Biden has overlooked and underestimated the economic and environmental benefits of biofuels like ethanol as part of our energy portfolio. Ethanol saves consumers money at the pump, it is made in the USA and a boom to the Midwest state economies, and it’s good for the environment.” There were no trades or open interest in ethanol futures.