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 Redbook YoY at 7:55 A.M., S&P Global Composite PMI Final, S&P Services PMI Final, ISM Services PMI, JOLT’s Job Openings, ISM Services Employment, RCM/TIPP Economic Optimism Index, ISM Services Prices, and JOLT’s Job Quits at 9:00 A.M., 42-Day Bill Auction at 10:30 A.M., API Energy Stocks, LMI Logistics Managers Index Current, and Total Vehicle Sales at 3:30 P.M.
Oil prices rise on uncertainty with OPEC+ production cuts and Middle East tensions. The US is refilling the strategic oil reserves fast with 3 million barrels per month as prices fall. The pace has run into a physical limit and also if we can purchase power to buy all the crude in a possible rising market. (which usually happens when we refurbish the SPR’s) The Biden administration drained 180 million barrels from the Strategic Petroleum Reserves (SPR) to stabilize prices after Russia’s invasion of Ukraine. Supply concerns will be priced in with the resumption of Israel-Hamas war. In the US data yesterday showed factory orders fell by more than analysts had expected in October and the most in more than three years, raising concern about the health of US demand. Also yesterday, US new car and light truck sales declined for the 2nd consecutive month and were down 1% from October at 15.3 Mil vehicles. Compared to a year ago, car sales were up 7%, marking the 16th consecutive month year-over-year increases. A year ago. Auto sales remained slow by tight supplies that were caused by a disastrous chip storage. We once led the world in chip manufacturing and lost that market too. Supply chain issues have been resolved, and sales have recovered. Jan-Nov car sales have risen to a 4-year high and are 12% more than last year. However, car dealers are now fighting rising interest rates, and commutative sales are still below the 2014-2019 average. We all will be watching interest rates with special attention as they put the Housing market in drydock. South American weather is what farmers and traders will give a closer than normal look as advertised earlier. South American weather will be the wildcard of the 2023/24 season. The EU weather model has trended much drier in Central & Northern Brazil through December 10th, , which maintains the GFS as the better performer in recent weekly forecasts. No longer is soaking rain seen in Mato Grosso & Goias Dec 4-6, and any pattern change continues to be confined to the 8-14 day period. Crop stress continues. High temps in Mato Grosso this week will reach 92-96 degrees , some 2-5 degrees above normal. However all models agree that finally a more normal Brazilian climate develops by mid-month. Both GFS and EU models agree that totals of 1-3” will blanket the northern half of Brazil’s ag belt Dec 11-18. There remains enormous uncertainty as to the degree of yields stabilization, and it’s critical that this pattern shift is pulled into the 5- and-7-day forecast by late week. Monthly rainfall of 8-10” is needed in Northern Brazil between now and early February. Brazilian planting delays remain meaningful. CONAB on Monday pegged soybean planting progress as 83% complete, vs 91% last year and versus 92% in 2021. First crop corn planting in Sao Paulo, Minas Gerais, and especially in Goias is well behind last year. Only 23% of summer corn has been planted, which compares to the 70% average. The Brazilian yield debate has begun in earnest. 63% of Brazil’s soy crop has reached the vegetative stage, with 15% now flowering. What is known is that harvest dates will be pushed back 1-2 weeks on a national basis and upward to 3-weeks regionally. In the overnight electronic session the March corn is currently trading at 484 ¾ which is ¾ of a cent lower. The trading range has been 487 ¾ to 483 ½.
Breaking news China has followed up on yesterday’s wheat purchase. With a new flash sale of 198K Hard Red Winter wheat.
On the Ethanol Front the Brazilian spot corn market is unwilling to drop below $5.90/Bu as threats to sugar production there boosts corn’s ethanol demand draw as the cash market Brazil will be rather tight until first-crop harvesting begins in earnest in Feb/Mar. Hikes to Canadian & Australian barley production weighed. Other fresh input is absent. Large US inventories hang over the market, and spot basis has weaken slightly on the roll from Dec to March. There is no doubt Dec 1st US stock will be large – up-1.0-1.2 Bil Bu from last year-and major supply fear will be kept at bay until more is known about Brazilian safrinha production. Yet, forward supply risk remain elevated. End user margins are profitable. South American export sales will be minimal between now and summer, leaving the US as the world’s dominate supplier. It’s important that US corn is the world’s cheapest reliable feed source. Cash sales remain on hold. There were no trades or open interest in ethanol futures.
Prices On The Rise Again. The Corn & Ethanol Report 12/05/2023
We kickoff the day with Redbook YoY at 7:55 A.M., S&P Global Composite PMI Final, S&P Services PMI Final, ISM Services PMI, JOLT’s Job Openings, ISM Services Employment, RCM/TIPP Economic Optimism Index, ISM Services Prices, and JOLT’s Job Quits at 9:00 A.M., 42-Day Bill Auction at 10:30 A.M., API Energy Stocks, LMI Logistics Managers Index Current, and Total Vehicle Sales at 3:30 P.M.
Oil prices rise on uncertainty with OPEC+ production cuts and Middle East tensions. The US is refilling the strategic oil reserves fast with 3 million barrels per month as prices fall. The pace has run into a physical limit and also if we can purchase power to buy all the crude in a possible rising market. (which usually happens when we refurbish the SPR’s) The Biden administration drained 180 million barrels from the Strategic Petroleum Reserves (SPR) to stabilize prices after Russia’s invasion of Ukraine. Supply concerns will be priced in with the resumption of Israel-Hamas war. In the US data yesterday showed factory orders fell by more than analysts had expected in October and the most in more than three years, raising concern about the health of US demand. Also yesterday, US new car and light truck sales declined for the 2nd consecutive month and were down 1% from October at 15.3 Mil vehicles. Compared to a year ago, car sales were up 7%, marking the 16th consecutive month year-over-year increases. A year ago. Auto sales remained slow by tight supplies that were caused by a disastrous chip storage. We once led the world in chip manufacturing and lost that market too. Supply chain issues have been resolved, and sales have recovered. Jan-Nov car sales have risen to a 4-year high and are 12% more than last year. However, car dealers are now fighting rising interest rates, and commutative sales are still below the 2014-2019 average. We all will be watching interest rates with special attention as they put the Housing market in drydock. South American weather is what farmers and traders will give a closer than normal look as advertised earlier. South American weather will be the wildcard of the 2023/24 season. The EU weather model has trended much drier in Central & Northern Brazil through December 10th, , which maintains the GFS as the better performer in recent weekly forecasts. No longer is soaking rain seen in Mato Grosso & Goias Dec 4-6, and any pattern change continues to be confined to the 8-14 day period. Crop stress continues. High temps in Mato Grosso this week will reach 92-96 degrees , some 2-5 degrees above normal. However all models agree that finally a more normal Brazilian climate develops by mid-month. Both GFS and EU models agree that totals of 1-3” will blanket the northern half of Brazil’s ag belt Dec 11-18. There remains enormous uncertainty as to the degree of yields stabilization, and it’s critical that this pattern shift is pulled into the 5- and-7-day forecast by late week. Monthly rainfall of 8-10” is needed in Northern Brazil between now and early February. Brazilian planting delays remain meaningful. CONAB on Monday pegged soybean planting progress as 83% complete, vs 91% last year and versus 92% in 2021. First crop corn planting in Sao Paulo, Minas Gerais, and especially in Goias is well behind last year. Only 23% of summer corn has been planted, which compares to the 70% average. The Brazilian yield debate has begun in earnest. 63% of Brazil’s soy crop has reached the vegetative stage, with 15% now flowering. What is known is that harvest dates will be pushed back 1-2 weeks on a national basis and upward to 3-weeks regionally. In the overnight electronic session the March corn is currently trading at 484 ¾ which is ¾ of a cent lower. The trading range has been 487 ¾ to 483 ½.
Breaking news China has followed up on yesterday’s wheat purchase. With a new flash sale of 198K Hard Red Winter wheat.
On the Ethanol Front the Brazilian spot corn market is unwilling to drop below $5.90/Bu as threats to sugar production there boosts corn’s ethanol demand draw as the cash market Brazil will be rather tight until first-crop harvesting begins in earnest in Feb/Mar. Hikes to Canadian & Australian barley production weighed. Other fresh input is absent. Large US inventories hang over the market, and spot basis has weaken slightly on the roll from Dec to March. There is no doubt Dec 1st US stock will be large – up-1.0-1.2 Bil Bu from last year-and major supply fear will be kept at bay until more is known about Brazilian safrinha production. Yet, forward supply risk remain elevated. End user margins are profitable. South American export sales will be minimal between now and summer, leaving the US as the world’s dominate supplier. It’s important that US corn is the world’s cheapest reliable feed source. Cash sales remain on hold. There were no trades or open interest in ethanol futures.
Have A Great Trading Day!
Thanks,
Questions? Ask Dan Flynn today at 312-264-4374Daniel Flynn