Dan Flynn is the writer of The Corn & Ethanol Report, a daily market letter covering grains, energies, and various global issues that are the driving force and backbone of the commodity markets. Contact Mr. Flynn at (312) 264-4374
We kickoff the day with Factory Orders MoM and Factory Orders ex Transportation at 9:00 A.M., Export Inspections at 10:00 A.M., 3-Month & 6-Month Bill Auction at 10:30 A.M., Dairy Products at 2:00 P.m., and Total Vehicle Sales.
On the Corn Front managed funds’ combined net short position in corn, Chicago wheat, soy & livestock futures on Tuesday were 237,600 contracts, up 64,000 from the prior week and the largest since summer 2020-prior to the beginning of the most structural bull cycle. Funds’ short in corn and CBOT wheat was 326,000 contracts, a 4-year high. The building of global corn stocks and record Russian exports are noted but this only happened a few times in history has funds’ short been larger than it is currently. Funds combined net grain short is the largest for late November on record. A fundamental spark is needed to trigger and sustain short covering, but chaos ensues if Brazilian rainfall disappoints or war in Ukraine damages key export infrastructure. The risk of being bearish is sizable amid the net short grain imbalance.
On Brazilian weather models predict expansion of showers ahead with the EU/GFS/Canadian models agree, but the models are at odds over total rainfalls. The EU model projects a more robust and welcomed projected rainfall of 2-3.50’. Well sports fans, it’s down to monitoring daily reported accumulations next week. We also had flash sales of 267K corn to Mexico and 440 SRW to China along with 183 tonnes of soybean meal to the Philippines. In the overnight electronic session the March corn is currently trading at 483 ¾ which is 1 cent lower. The trading range has been 484 ¼ to 481 ¼.
On the Ethanol Front USDA-NASS’s October Grain Crush Report on Friday afternoon pegged US corn ethanol grind at 461 Mil Bu,, up 31 Mil Bu, from September and up 13 Mil Bu from last year. The US corn grind to produce ethanol in Sep-October is at a five-year high 892Mil Bu, up 59 Mil Bu, year-over-year. Sizable ethanol production and corn use during autumn was not a surprise given the surge in cash margins and deflated US ethanol stocks. However, using weekly EIA data, ARC estimates ethanol demand use in November at 452 Mil Bu, up just 2 Mil from last year. Demand excitement and growth in ethanol is shifting to enlarged US corn exports. Agricultural Resources agrees with the USDA annual US corn ethanol grind of 5,325 Mil Bu, but the ethanol market recently has been challenged by lower-than-expected gasoline use. US driven miles weakens seasonably during the winter months which could cause the ethanol grind to be no better than 2022/23. Additionally, despite US ethanol stocks/use being tight relative than last year, the cash price of ethanol in the Midwest has collapsed to just $1.65-$1.75/Gal. This compares to $2.00-$2.25 in Sep-Oct and $2.20-$2.25 a year ago. Production margins In the cash market remain highly profitable, but no longer is the market signaling the need to maximize capacity. US ethanol plant revenue calculated above all costs is important, but CBOT spot corn futures above $5.20 – $5.40 turns US ethanol margins negative. Don’t forget Thursday’s OPEC+ production cut of 2.2 million barrels per day. We will be watching lower gasoline prices simulate YoY gasoline demand growth. December ethanol futures expire tomorrow and there were no trades or open interest in ethanol futures.
Tight Supply Fears In Food & Energy Ahead? The Corn & Ethanol Report 12/04/2023
We kickoff the day with Factory Orders MoM and Factory Orders ex Transportation at 9:00 A.M., Export Inspections at 10:00 A.M., 3-Month & 6-Month Bill Auction at 10:30 A.M., Dairy Products at 2:00 P.m., and Total Vehicle Sales.
On the Corn Front managed funds’ combined net short position in corn, Chicago wheat, soy & livestock futures on Tuesday were 237,600 contracts, up 64,000 from the prior week and the largest since summer 2020-prior to the beginning of the most structural bull cycle. Funds’ short in corn and CBOT wheat was 326,000 contracts, a 4-year high. The building of global corn stocks and record Russian exports are noted but this only happened a few times in history has funds’ short been larger than it is currently. Funds combined net grain short is the largest for late November on record. A fundamental spark is needed to trigger and sustain short covering, but chaos ensues if Brazilian rainfall disappoints or war in Ukraine damages key export infrastructure. The risk of being bearish is sizable amid the net short grain imbalance.
On Brazilian weather models predict expansion of showers ahead with the EU/GFS/Canadian models agree, but the models are at odds over total rainfalls. The EU model projects a more robust and welcomed projected rainfall of 2-3.50’. Well sports fans, it’s down to monitoring daily reported accumulations next week. We also had flash sales of 267K corn to Mexico and 440 SRW to China along with 183 tonnes of soybean meal to the Philippines. In the overnight electronic session the March corn is currently trading at 483 ¾ which is 1 cent lower. The trading range has been 484 ¼ to 481 ¼.
On the Ethanol Front USDA-NASS’s October Grain Crush Report on Friday afternoon pegged US corn ethanol grind at 461 Mil Bu,, up 31 Mil Bu, from September and up 13 Mil Bu from last year. The US corn grind to produce ethanol in Sep-October is at a five-year high 892Mil Bu, up 59 Mil Bu, year-over-year. Sizable ethanol production and corn use during autumn was not a surprise given the surge in cash margins and deflated US ethanol stocks. However, using weekly EIA data, ARC estimates ethanol demand use in November at 452 Mil Bu, up just 2 Mil from last year. Demand excitement and growth in ethanol is shifting to enlarged US corn exports. Agricultural Resources agrees with the USDA annual US corn ethanol grind of 5,325 Mil Bu, but the ethanol market recently has been challenged by lower-than-expected gasoline use. US driven miles weakens seasonably during the winter months which could cause the ethanol grind to be no better than 2022/23. Additionally, despite US ethanol stocks/use being tight relative than last year, the cash price of ethanol in the Midwest has collapsed to just $1.65-$1.75/Gal. This compares to $2.00-$2.25 in Sep-Oct and $2.20-$2.25 a year ago. Production margins In the cash market remain highly profitable, but no longer is the market signaling the need to maximize capacity. US ethanol plant revenue calculated above all costs is important, but CBOT spot corn futures above $5.20 – $5.40 turns US ethanol margins negative. Don’t forget Thursday’s OPEC+ production cut of 2.2 million barrels per day. We will be watching lower gasoline prices simulate YoY gasoline demand growth. December ethanol futures expire tomorrow and there were no trades or open interest in ethanol futures.
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Questions? Ask Dan Flynn today at 312-264-4374Daniel Flynn