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 Non Farm Payrolls, Unemployment Rate, Average Hourly Earnings MoM & YoY, Participation Rate, Average Weekly Hours, Government Payrolls, Manufacturing Payrolls, Nonfarm Payrolls Private, and U-6 Unemployment Rate at 7:30 A.M., S&P Global Manufacturing PMI Final at 8:45 A.M., ISM Manufacturing PMI, ISM Manufacturing Employment, Construction Spending MoM, ISM Manufacturing New Orders, and ISM Manufacturing Prices at 9:00 A.M., Baker Hughes Oil & Total Rig Count at 12:00 P.M., Cotton System and Fats & Oils at 2:00 P.M.
The Fed’s preferred inflation index, the Personal Consumption Expenditure Index, rose by 0.2% in September to match July as the highest monthly inflation rate since April. On a annualized basis, the inflation rate was 2.1%, but the PCE Index set a record high of 123.9 in September. Personal income rose by 0.3% from September, while personal spending increased by 0.5%. The SAVINGS RATE fell from 4.8% in August to 4.6% in September, the lowest since December 2023. These Halloween numbers were no trick or treat. Note that since the Fed began raising interest rates in May 2022, the SAVINGS RATE never got above 5.5% on a monthly basis and has averaged just 4.4% over the last 28 months as savings inflation. These are just not promising numbers.
South American Weather Pattern Discussion
Argentine Rain Pulled into 5-Day Forecast; Highly Active Brazilian Monsoon Projected Early November:
The South American forecast remains consistent and confidence is rising with respect to a pattern of widespread heavy rainfall. Soaking totals will impact all but Rio Grande do Sul in far Southern Brazil. Importantly, the return of the Argentine rainfall has been pulled into very short-term forecasts. Any concern of abnormal South American dryness is being pushed back to December. The EU ensemble model 5-day forecast shows monsoonal rainfall in central & northern Brazil will be rather intense Nov 2-8. 10-day rainfall in Mato Grosso, norther Mato Grosso do Sul, Goias, and Sao Paulo – 50% of Brazilian soybean area – which will reach upward of 5-8”. Soybean seeding there will be a bit more labored, but subsoil moisture reserves will be established no later than mid-November. Record South American soybean yield potential is intact.
Central US Weather Pattern Discussion
Dryness Covers 97% of US Corn Area; Major Relief Ahead for E Plains/Midwest:
The coverage of abnormal dryness/drought expanded Central US – wide last week. Drought on Tuesday covered 81% of US corn planted area, and abnormal dryness/drought covered 97%. Only parts of the mid-South, TX,/OK panhandles and ND are clear. Substantial moisture is needed to replenish US soil moisture. Fortunately, drought will be eased considerably in E OK, E KS, AR, MO, IA, and IL in the next 7 days. The major forecast models agree that rainfall of 7.5-1.00” will blanket all but the far W Plains Nov 1-6. Totals of 3+” favor OK, E KS, AR, MO, IL, and parts of eastern IA. The GFS model’s projected change in soil moisture over the next 8 days shows reduced evaporation rates help. A modest improvement in US winter wheat ratings is projected over the next two weeks, but regular rain/snow will be needed in CO, W KS, NE, and the Dakotas.
US Biodiesel & Renewable Diesel Production Update
The EIA’s October Petroleum Supply Monthly report showed that combined Renewable Fuel and Biodiesel production slowed slightly in August and slipped to a 3-month low. The combined fuel output totaled 454.9 Mil gallons. Biodiesel production of 146 Mil gallons was unchanged from July and up 1% from last year, at a 10-month high. August renewable diesel production amounted to 279 Mil gallons, a 35% decline from July, but a 15% increase over last year. Other fuel production rose 21% from July and was 34% larger than a year ago, at a 8 month high of 29.4 Mil gallons. Combined fuel production for Jan-Aug amounted to 2,412 Mil gallons or 23% increase over last year. This marks the 12th consecutive year of record biofuel production. However, the 2024 expansion rate is down from 67% last year and 81% two years ago as the industry has slowed new pant development.
CBOT Corn Ends Flat; Export Disappearance to Offset Favorable South American Weather in Late Year; World Fob Premiums Rally:
The bulls and bears continue to struggle. Odds are high world importer demand is funneled to South America in spring 2025 as soil moisture surpluses will be established in Argentina and S Brazil by mid-month, but in the meantime US export disappearance stays elevated. US sales in the week ending Oct 24th were 92 Mil Bu. Sales must average only 28.5 Mil/week to meet the USDA’s target, and the US market is gaining competitiveness as basis levels in S America surpluses won’t be replenished until summer. 35% of Argentina’s crop has been planted. 50-55% of Argentine corn will be planted in Dec and harvested in Jun-Jul. It’s just tough to be bearish below $4.10, Dec, and equally difficult to be bullish above $4.30. Ag Resources (ARC) maintains the market has found equilibrium. End users and producers should prepare for a narrow, neutral range into December expiration.
Election – Inflation and Scary Unemployment Numbers. The Corn & Ethanol Report 11/01/2024
We kickoff the day with Non Farm Payrolls, Unemployment Rate, Average Hourly Earnings MoM & YoY, Participation Rate, Average Weekly Hours, Government Payrolls, Manufacturing Payrolls, Nonfarm Payrolls Private, and U-6 Unemployment Rate at 7:30 A.M., S&P Global Manufacturing PMI Final at 8:45 A.M., ISM Manufacturing PMI, ISM Manufacturing Employment, Construction Spending MoM, ISM Manufacturing New Orders, and ISM Manufacturing Prices at 9:00 A.M., Baker Hughes Oil & Total Rig Count at 12:00 P.M., Cotton System and Fats & Oils at 2:00 P.M.
The Fed’s preferred inflation index, the Personal Consumption Expenditure Index, rose by 0.2% in September to match July as the highest monthly inflation rate since April. On a annualized basis, the inflation rate was 2.1%, but the PCE Index set a record high of 123.9 in September. Personal income rose by 0.3% from September, while personal spending increased by 0.5%. The SAVINGS RATE fell from 4.8% in August to 4.6% in September, the lowest since December 2023. These Halloween numbers were no trick or treat. Note that since the Fed began raising interest rates in May 2022, the SAVINGS RATE never got above 5.5% on a monthly basis and has averaged just 4.4% over the last 28 months as savings inflation. These are just not promising numbers.
South American Weather Pattern Discussion
Argentine Rain Pulled into 5-Day Forecast; Highly Active Brazilian Monsoon Projected Early November:
The South American forecast remains consistent and confidence is rising with respect to a pattern of widespread heavy rainfall. Soaking totals will impact all but Rio Grande do Sul in far Southern Brazil. Importantly, the return of the Argentine rainfall has been pulled into very short-term forecasts. Any concern of abnormal South American dryness is being pushed back to December. The EU ensemble model 5-day forecast shows monsoonal rainfall in central & northern Brazil will be rather intense Nov 2-8. 10-day rainfall in Mato Grosso, norther Mato Grosso do Sul, Goias, and Sao Paulo – 50% of Brazilian soybean area – which will reach upward of 5-8”. Soybean seeding there will be a bit more labored, but subsoil moisture reserves will be established no later than mid-November. Record South American soybean yield potential is intact.
Central US Weather Pattern Discussion
Dryness Covers 97% of US Corn Area; Major Relief Ahead for E Plains/Midwest:
The coverage of abnormal dryness/drought expanded Central US – wide last week. Drought on Tuesday covered 81% of US corn planted area, and abnormal dryness/drought covered 97%. Only parts of the mid-South, TX,/OK panhandles and ND are clear. Substantial moisture is needed to replenish US soil moisture. Fortunately, drought will be eased considerably in E OK, E KS, AR, MO, IA, and IL in the next 7 days. The major forecast models agree that rainfall of 7.5-1.00” will blanket all but the far W Plains Nov 1-6. Totals of 3+” favor OK, E KS, AR, MO, IL, and parts of eastern IA. The GFS model’s projected change in soil moisture over the next 8 days shows reduced evaporation rates help. A modest improvement in US winter wheat ratings is projected over the next two weeks, but regular rain/snow will be needed in CO, W KS, NE, and the Dakotas.
US Biodiesel & Renewable Diesel Production Update
The EIA’s October Petroleum Supply Monthly report showed that combined Renewable Fuel and Biodiesel production slowed slightly in August and slipped to a 3-month low. The combined fuel output totaled 454.9 Mil gallons. Biodiesel production of 146 Mil gallons was unchanged from July and up 1% from last year, at a 10-month high. August renewable diesel production amounted to 279 Mil gallons, a 35% decline from July, but a 15% increase over last year. Other fuel production rose 21% from July and was 34% larger than a year ago, at a 8 month high of 29.4 Mil gallons. Combined fuel production for Jan-Aug amounted to 2,412 Mil gallons or 23% increase over last year. This marks the 12th consecutive year of record biofuel production. However, the 2024 expansion rate is down from 67% last year and 81% two years ago as the industry has slowed new pant development.
CBOT Corn Ends Flat; Export Disappearance to Offset Favorable South American Weather in Late Year; World Fob Premiums Rally:
The bulls and bears continue to struggle. Odds are high world importer demand is funneled to South America in spring 2025 as soil moisture surpluses will be established in Argentina and S Brazil by mid-month, but in the meantime US export disappearance stays elevated. US sales in the week ending Oct 24th were 92 Mil Bu. Sales must average only 28.5 Mil/week to meet the USDA’s target, and the US market is gaining competitiveness as basis levels in S America surpluses won’t be replenished until summer. 35% of Argentina’s crop has been planted. 50-55% of Argentine corn will be planted in Dec and harvested in Jun-Jul. It’s just tough to be bearish below $4.10, Dec, and equally difficult to be bullish above $4.30. Ag Resources (ARC) maintains the market has found equilibrium. End users and producers should prepare for a narrow, neutral range into December expiration.
Have A Great Trading Day!
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Questions? Ask Dan Flynn today at 312-264-4374Daniel Flynn