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, and MBA Purchase Index at 6:00 A.M., PPI MoM Final, Core PPI MoM Final, and PPI Ex Food, Energy & Trade MoM Final at 7:30 A.M., Fed Goolsbee Speech at 8:30 A.M., EIA Energy Stocks at 9:30 A.M., 17-Week Bill Auction at 10:30 A.M., Dairy Products Sales at 2:00 P.M., Fed Barr Speech at 3:00 P.M., and Fed Bostic Speech at 6:00 P.M.
The monthly Consumer Price Index showed CPI inflation in January was above the average trade estimate, at 3.1% on a year-over-year basis and up 0.3% from December. While the inflation rate was down from last year’s 6.4%, the Consumer Price Index still set a record high in January. The Food, Food & Beverage, Housing, Medical Care, Other Goods & Services, and Core Inflation index also set new record highs in January. The All-Energy Index was down 4.6% and the Gasoline Index fell 6.4%, compared to the pre-pandemic level, the CPI is up 19%, with food prices 25% higher and energy up 32%. Nobody wants to own these numbers.
CONAB and USDA could not be farther apart on Brazilian corn production. This plays into the game as we compound weather in the region and lack of old crop carryover which is evidenced by Brazil’s spot corn futures still perched above $5.50/Bu. USDA likely overstated last year’s Brazilian harvest. Recent history shows CONAB & USDA have not been close to projecting Brazilian corn production prior to the beginning of safrinha harvesting.
South American weather stays non-threatening into the end of February with the EU and GFS models in good agreement and consistent with prior runs. Warmth and dryness blanket central and northern Brazil into the weekend, which keeps soybean and first crop corn harvest progress swift. Regular rain returns to northern Brazil in the 6-15 day period. Dry and mild conditions are projected in Argentina throughout the next two weeks. Rain is needed in Parana in S Brazil, but totals of 1-3” are forecast there over the next 10-days. The Brazilian monsoon performs normally. Assuming the two-week forecast verifies, rainfall and accumulation in Mato Grosso – which produces 48-54% of Brazil’s safrinha corn crop – will be slightly above normal at 9.%”. Soil moisture reserves will be building, not contracting. March & April warrant most attention in N Brazil. It’s known the wet season begins to wane, but it’s the speed and intensity of the monsoon’s exit that is key to the corn/feed market price direction in spring.
The CBOT grain values are lower with traders preparing for a bearish 2024/25 US soybean, corn and wheat end stock forecast from WASDE during the 2024 Ag Outlook Forum. US 2024/25 corn stocks are forecast between 2,500-2,600 Mil Bu with soybean end stocks expected to rise near 400 Mil Bu. Similar large stocks were offered in the November Baseline report but seeing them in print will grab media attention.
CPI Takes Bulls By the Horn. The Corn & Ethanol Report 02/14/2024
We kickoff the day with MBA 30-Year Mortgage Rate, MBA Mortgage Applications, MBA Mortgage Market Index, MBA Mortgage Refinance Index, and MBA Purchase Index at 6:00 A.M., PPI MoM Final, Core PPI MoM Final, and PPI Ex Food, Energy & Trade MoM Final at 7:30 A.M., Fed Goolsbee Speech at 8:30 A.M., EIA Energy Stocks at 9:30 A.M., 17-Week Bill Auction at 10:30 A.M., Dairy Products Sales at 2:00 P.M., Fed Barr Speech at 3:00 P.M., and Fed Bostic Speech at 6:00 P.M.
The monthly Consumer Price Index showed CPI inflation in January was above the average trade estimate, at 3.1% on a year-over-year basis and up 0.3% from December. While the inflation rate was down from last year’s 6.4%, the Consumer Price Index still set a record high in January. The Food, Food & Beverage, Housing, Medical Care, Other Goods & Services, and Core Inflation index also set new record highs in January. The All-Energy Index was down 4.6% and the Gasoline Index fell 6.4%, compared to the pre-pandemic level, the CPI is up 19%, with food prices 25% higher and energy up 32%. Nobody wants to own these numbers.
CONAB and USDA could not be farther apart on Brazilian corn production. This plays into the game as we compound weather in the region and lack of old crop carryover which is evidenced by Brazil’s spot corn futures still perched above $5.50/Bu. USDA likely overstated last year’s Brazilian harvest. Recent history shows CONAB & USDA have not been close to projecting Brazilian corn production prior to the beginning of safrinha harvesting.
South American weather stays non-threatening into the end of February with the EU and GFS models in good agreement and consistent with prior runs. Warmth and dryness blanket central and northern Brazil into the weekend, which keeps soybean and first crop corn harvest progress swift. Regular rain returns to northern Brazil in the 6-15 day period. Dry and mild conditions are projected in Argentina throughout the next two weeks. Rain is needed in Parana in S Brazil, but totals of 1-3” are forecast there over the next 10-days. The Brazilian monsoon performs normally. Assuming the two-week forecast verifies, rainfall and accumulation in Mato Grosso – which produces 48-54% of Brazil’s safrinha corn crop – will be slightly above normal at 9.%”. Soil moisture reserves will be building, not contracting. March & April warrant most attention in N Brazil. It’s known the wet season begins to wane, but it’s the speed and intensity of the monsoon’s exit that is key to the corn/feed market price direction in spring.
The CBOT grain values are lower with traders preparing for a bearish 2024/25 US soybean, corn and wheat end stock forecast from WASDE during the 2024 Ag Outlook Forum. US 2024/25 corn stocks are forecast between 2,500-2,600 Mil Bu with soybean end stocks expected to rise near 400 Mil Bu. Similar large stocks were offered in the November Baseline report but seeing them in print will grab media attention.
Have A Great Trading Day!
Thanks,
Questions? Ask Dan Flynn today at 312-264-4374Daniel Flynn