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 NFIB Business Optimism Index at 5:00 A.M., PPI, PPI MoM & YoY, Core PPI MoM & YoY, and PPI Ex Food, Energy and Trade at 7:30 A.M., Redbook YoY at 7:55 A.M., Fed Schmid Speech at 9:00 A.M., RCM/TIPP Economic Optimism Index at 9:05 A.M., 42-Day Bill Auction at 10:30 A.M., EIA Short Term Energy Outlook at 1`1:00 A.M., Fed Williams Speech at 2:05 P.M., and API Energy Stocks at 3:30 P.M.
Last week’s Commitment of Traders report was delayed due to the observance of former President Jimmy Carter’s funeral. The report released on Monday showed another week of large buying in the principal Ag markets, for the week ending January 7th . Funds bought 24,540 corn contracts, 13,835 contracts of soybeans, 6,318 soybean meal contracts, 14,261 contracts in live cattle, and 4,455 contracts in feeder cattle. Funds sold 3,423 contracts in soybean oil, 2,114 contracts across all 3 wheat exchanges, and 11,751 contracts in hogs. Funds were net long in 4 of the 10 markets, with a net long position across all 10 markets of 403,127 contracts, up 43,465 contracts for the week and the most since February 2023. Since the 7th, Ag Resources (ARC) estimates that funds have bought over 100,000 contracts in the CBOT soy, corn, and wheat markets.
South American Weather pattern Discussion
More Rain Needed in Argentina; Welcomed Pattern Shift Forecast in Brazil:
Net soil moisture loss will persist for another 10 days in Argentina with heat this week to intensify crop stress. Highs in Cordoba & Santa Fe in C Argentina Tues-Fri are projected in a range of 93-103 degrees. A few scattered showers are possible over the next 10 days, but widespread/heavy rain is not indicated. The best-performing EU ensemble model’s two-week % of normal precipitation may show up in parts of mid $ South Argentina. Fortunately extreme heat ends this weekend. However, ARC does note a nearly ideal pattern persists in Brazil. Heavy shower activity will migrate southward from Mato Grosso/Goias into Mato Grosso do Sul and Parana in the 6-10 day period. All of Brazil will be well watered into Jan 28th . Brazilian temps will be near/below normal with max readings capped in the 80’s
The US corn market has rightly added supply premium following sharply lower yield amid less than ideal weather in Argentina. There’s no disputing global corn supplies are not abundant, but the response in demand is critical over the next 30 days. Cash corn in Western IA on Friday was quoted at $4.53/Bu, up only slightly on the week. ARC calculates plant revenue in the Western Midwest $.25/Gal below all cost and even $.04/Gal below variable costs – and below variable cost for the first time since February 2024. Ethanol grind has been stellar since harvest, but the winter months are typically defined by reduced gasoline consumption and expanded US ethanol inventories. Weekly grind is forecast to trend lower between now and May. ARC strongly doubts additional hikes to 2024/25 industrial corn use lie ahead.
Corn Comments
CBOT Corn Scores Newer High as Int’l Trade Plays catch up; Fund Length Rivals 2020-22 Bull Market:
Global corn markets ended firm as funds build upon existing length and as there remains uncertainty over the degree of rainfall intensity/coverage in late January. Following USDA’s slashing of US corn end stocks, there’s far less tolerance for S American supply dislocation. Much of Argentina’s corn crop will pollinate in Jan/Feb. An extension of the rainy season in N Brazil is also desired. March CBOT’s testing of $4.80 is justified, but ARC indications confirmed South Am production loss is needed to sustain the rally in mid- and late winter. Managed funds last Tuesday were long a net 253,000 contacts vs. 229,000 the previous wee. ARC estimates fund length last night at 302,000 contracts – which is near peaks of 2021-2022. It’s difficult to justify such length amid the absence of the global demand driver. Be prepared for volatility as fund length gets liquidated amid a slowing of new bullish input.
Funds Heavily Long Liquidation Probable. The Corn & Ethanol Report 01/14/2025
We kickoff the day with NFIB Business Optimism Index at 5:00 A.M., PPI, PPI MoM & YoY, Core PPI MoM & YoY, and PPI Ex Food, Energy and Trade at 7:30 A.M., Redbook YoY at 7:55 A.M., Fed Schmid Speech at 9:00 A.M., RCM/TIPP Economic Optimism Index at 9:05 A.M., 42-Day Bill Auction at 10:30 A.M., EIA Short Term Energy Outlook at 1`1:00 A.M., Fed Williams Speech at 2:05 P.M., and API Energy Stocks at 3:30 P.M.
Last week’s Commitment of Traders report was delayed due to the observance of former President Jimmy Carter’s funeral. The report released on Monday showed another week of large buying in the principal Ag markets, for the week ending January 7th . Funds bought 24,540 corn contracts, 13,835 contracts of soybeans, 6,318 soybean meal contracts, 14,261 contracts in live cattle, and 4,455 contracts in feeder cattle. Funds sold 3,423 contracts in soybean oil, 2,114 contracts across all 3 wheat exchanges, and 11,751 contracts in hogs. Funds were net long in 4 of the 10 markets, with a net long position across all 10 markets of 403,127 contracts, up 43,465 contracts for the week and the most since February 2023. Since the 7th, Ag Resources (ARC) estimates that funds have bought over 100,000 contracts in the CBOT soy, corn, and wheat markets.
South American Weather pattern Discussion
More Rain Needed in Argentina; Welcomed Pattern Shift Forecast in Brazil:
Net soil moisture loss will persist for another 10 days in Argentina with heat this week to intensify crop stress. Highs in Cordoba & Santa Fe in C Argentina Tues-Fri are projected in a range of 93-103 degrees. A few scattered showers are possible over the next 10 days, but widespread/heavy rain is not indicated. The best-performing EU ensemble model’s two-week % of normal precipitation may show up in parts of mid $ South Argentina. Fortunately extreme heat ends this weekend. However, ARC does note a nearly ideal pattern persists in Brazil. Heavy shower activity will migrate southward from Mato Grosso/Goias into Mato Grosso do Sul and Parana in the 6-10 day period. All of Brazil will be well watered into Jan 28th . Brazilian temps will be near/below normal with max readings capped in the 80’s
US Ethanol Discussion
Cash Corn Above $4.50 Stressing Ethanol Balance Sheets:
The US corn market has rightly added supply premium following sharply lower yield amid less than ideal weather in Argentina. There’s no disputing global corn supplies are not abundant, but the response in demand is critical over the next 30 days. Cash corn in Western IA on Friday was quoted at $4.53/Bu, up only slightly on the week. ARC calculates plant revenue in the Western Midwest $.25/Gal below all cost and even $.04/Gal below variable costs – and below variable cost for the first time since February 2024. Ethanol grind has been stellar since harvest, but the winter months are typically defined by reduced gasoline consumption and expanded US ethanol inventories. Weekly grind is forecast to trend lower between now and May. ARC strongly doubts additional hikes to 2024/25 industrial corn use lie ahead.
Corn Comments
CBOT Corn Scores Newer High as Int’l Trade Plays catch up; Fund Length Rivals 2020-22 Bull Market:
Global corn markets ended firm as funds build upon existing length and as there remains uncertainty over the degree of rainfall intensity/coverage in late January. Following USDA’s slashing of US corn end stocks, there’s far less tolerance for S American supply dislocation. Much of Argentina’s corn crop will pollinate in Jan/Feb. An extension of the rainy season in N Brazil is also desired. March CBOT’s testing of $4.80 is justified, but ARC indications confirmed South Am production loss is needed to sustain the rally in mid- and late winter. Managed funds last Tuesday were long a net 253,000 contacts vs. 229,000 the previous wee. ARC estimates fund length last night at 302,000 contracts – which is near peaks of 2021-2022. It’s difficult to justify such length amid the absence of the global demand driver. Be prepared for volatility as fund length gets liquidated amid a slowing of new bullish input.
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Questions? Ask Dan Flynn today at 312-264-4374Daniel Flynn