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 MBA 30-Year Mortgage Rate, MBA Mortgage Applications, MBA Mortgage Market Index, MBA Mortgage Refinance Index, MBA Purchase at 6:00 A.M., US Trade Balce, Exports & Imports at 7:30 A.M., EIA Energy Stocks at 9:30 A.M., Fed Kugler Speech at 10:00 A.M., Fed Collins Speech and 17-Week Bill Auction at 10:30 A.M., Fed Barkin Speech at 11:30 A.M., 10-Year Note Auction at 12:00 P.M., Fed Bowman Speech at 1:00 P.M., Consumer Credit Change, Dairy Products Sales, LMI Logistics Managers Index, and Used Car Sales MoM & YoY at 2:00 P.M.
Reuters reported yesterday, Global stocks of diesel and other middle distillates are below normal and prices could start to rise quickly if the industrial economies of North America and Western Europe emerge from their lingering recession. This and the weather forecast of a Polar Vortex may lie ahead in late February as we watch South American weather has farmers concerned about their margins, and locking in cheaper prices as in diesel as the market has begun upward pressure on fuel prices, as we move closer to planting season. Last night’s American Petroleum Institute (API) released their weekly stockpile report which showed builds in crude + 0.674M, Cushing + 0.492M, gasoline + 3.699m. Todays Energy Information Agency (EIA) will release there data and we will key on matching size of draws in distillates as it is broken down in diesel, jet fuel, and home heating oil to mention a few. Winter coldness is not guaranteed to be over. Also, headlines from some forecasters see a possible Polar Vortex which would turn cold again. Not to say abnormal is cold, it’s winter, but coming off above normal temperatures this is another mark for the bullish tally in the fundamental signs of a rally is sure to come in food and energy.
The New York Fed’s quarterly report on consumer debt showed yet another quarter of record large consumer debt. Total consumer debt at the end of Q4 2023 has increased by $212 Bil from Q3 to a record large $17.5 Tril. Mortgage debt account for 70% of total debt, which was in line with the long-term average. Mortgage debt increased by $112 Bil (1%) from Q3 and was $329 Bil (3%) larger than a year ago. Mortgage originations were down 21% from a year ago and the lowest since 2014. Aoto loan debt was the 2nd largest category and increased 1% for the quarter and was up 4% from last year. Student Loan DEBT was the 3rd largest form of debt but was unchanged both for the quarter and compared to last year credit card debt jumped 5% from Q# and was up 15% from a year ago, at a record large $1.13 Tril. If this is Bidenomics were not feeling the love and these numbers don’t lie.
South American weather lacks new threats; with final production very uncertain. Heat and dryness in Argentina to end beyond the next three days and enough rain falls across Central and Southern Brazil to keep soil moisture stable. New threats are lacking, but no doubt the top end of Argentine yield potential has been trimmed and Brazilian corn production hinges completely on whether Brazil’s monsoon season is extended into late April or not. Heavy cumulative rainfall is forecast in Argentina Feb 15-16. Totals upward 2-3” are advertised in key areas of Cordoba, Buenos Aires, and Santa Fe. Heat ends on Friday. However, ARC notes that top-and-subsoil moisture levels have fallen significantly, and some measure of yield loss is unavoidable. Normal showers persist in N Brazil. Brazilian drought concerns today are confined to Mato Grosso do Sul and Sao Paulo , where Jan15-Feb15 rainfall will total just 40-55% of normal.
Whispers are becoming talking of a Polar Vortex covering a large portion of the lower 48 in late-Feb. This is causing concerns and farmers will ponder enough of Mother Natures wrath and one thing you can bet on for sure, rallies in food and energy prices ahead of the planting season. The grain futures are weaker with corn falling to a fresh 3-year low. The 2-day short covering rally appears to have ended as traders fear a bearish USDA/CONAB report on Thursday. Rain fell in abundance across South Central Buenos Aires and Southern Argentina overnight and this added to the decline. However, Us and South American farmers appear to be selling and we suspect that futures will struggle to accelerate the decline. The AI Momentum Funds are pushing values lower to see if the market is able to push back. ARC notes that open interest fell on Tuesday suggesting a long liquidation. The Index Fund roll starts Thursday and front running the roll has pushed out corn spreads and likely sparked the liquidation. Soybean open interest rose 1,222 contracts and Chicago wheat was up 2,284 contracts. Yet, the big gainer was soybean oil which rose 5,640 contracts on the rally with several sizable block trades reported.
Have A Great Trading Day!