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., ADP Employment Change at 7:15 A.M., Trade Balance and Treasury Refunding at 7:30 A.M., Fed Barkin Speech at 8:00 A.M., S&P Global Composite PMI Final and S&P Global Services PMI Final at 8:45 A.M., ISM Services PMI, ISM Services Business Activity, ISM Services Employment, ISM Services New Orders, and ISM Services Prices at 9:00 A.M. EIA Energy Stocks at 9:30 A.M., 17-Week Bill Auction at 10:30 A.M., Fed Goolsbee Speech at 12:00 P.M., Dairy Products, Dairy Products Sales, and Fed Bowman Speech at 2:00 P.M., and Fed Jefferson Speech & Total Vehicle Sales at 6:30 P.M.
Purdue University’s Ag Economy Barometer and other indexes reflected an uptick in farmer optimism in January, which correlated with higher cash grain prices in all regions of the Midwest. The Ag Economy Barometer gained 5 points in January and was 35 points higher than in 2024, at 141. This was the highest in January since 2021. The Index for Current Conditions rose 9 points from December and was 6 points higher than a year ago at 109. The Future Expectations Index rose 3 points from December and was 48 points higher than a year ago. This was the most significant year-over-year increase since April 2021 and the 3rd largest increase on record. The Farm Financial Performance Index gained 13 points in January to a 2-year high, with farmers expecting that 2025 will be better than 2024. 40% of farmers thought US agriculture was at risk of a trade war, while 60% had no opinion or thought it was unlikely.
South American Weather Pattern Discussion
Rain Soaks Cordoba & Buenos Aires; Near to Below Normal Precipitation Forecast Across Brazil: The South American forecast is consistent in projecting the best rain in weeks across central Argentina in the next 48 hours. Cumulative totals are projected upward of 1.75-3.00”. Additional rain is forecast in Central and Northern Argentina in the 6-10 day period. Regional drought persists in Argentina mainly in the north and across La Pampa, but rain this week will impact the highest concentrated corn/soy producing area of the county. The EU model’s 10-day precipitation forecast in Argentina ^ S Brazil shows: Needed dryness will blanket Mato Frosso & Goias into the weekend. Regular showers return to N Brazil thereafter. And periodic rain will impact Mato Grosso do Sul & Parana in Brazil in the next 10 days. Following ARC’s tour of Brazil this week, rain in south-central Brazil is beneficial to soy pod filling there. The drier weather across Northern Brazil allows the harvest to accelerate and winter corn to be seeded.
Corn Retest Contract High on Hope for China/US Tariff Pause, Funds Return With Purchases of 11,000 Contracts on Speculative Inflows:
CBOT corn futures closed higher amid the hope that China would buy US corn as another “olive branch” to the Trump Administration on trade/tariffs. China retaliated against 10% US tariffs overnight in a measured way to hold open negotiation chances. US President Trump suggested that he would talk with Chinese President Xi early yesterday, but later in the evening he suggested that he was in no hurry to speak. In the overnight session corn futures are not blinking with funds adding to their net long position in yesterday’s action, and the knowledge President Trump will always listen to “common sense” fair negotiations that will bear fruit. Brazil’s ship lineup indicates that 1.00-1.50 MMT “could” be exported in February. USDA’s January WASDE projection of Brazil’s marketing year (Mar-Feb) was lowered 2 MMT to 39.5 MMT. ARC expects Brazil final exports will be 37.5-38.0 MMT. The charts show that corn export commitments are five standard deviations below the average level needed to meet USDA’s projection. Commitments accounted for 93.6% of projected exports vs. 100.2% last year and less than the 5-year average of 99.8% (range 87.0%-101.9%). ARC doubts China will secure US corn. A range trade of $4.60-$5.10 is forecast into spring.
US Ethanol Yield Improves on Corn Dry Matter:
The official US ethanol yield in November was 2.99 Gal/Bu, a new record, compared to 2.90 the previous year. Abnormally low corn seed moisture content aids the industrial and feed industries. Due to less seed moisture, less corn is required to produce a gallon of ethanol or a pound of meat. This should be reflected in US corn feed/residual use in coming quarterly reports. ARC estimates that the US ethanol yield at or just above 3.00 Gal/Bu. Ethanol grind remains strong. But ARC doubts USDA will hike its industrial corn use forecast by more than 25 Mil Bu through the balance of the crop year. In fact, the higher ethanol production rate could cause WASDE to lower its corn grind rate for ethanol by 25-50 Mil Bu. Assuming EIA ethanol data, ARC pegs ethanol production in September and January at 6.9 Bil Gal, up 5% year-over-year. However, corn used for ethanol production in September and January is estimated at 2.3 Bil Bu, up 2.8% year-over-year. This is above the USDA annual forecast, but US ethanol grind is forecast to slow.
Funds & Markets Following the Master Negotiator. The Corn & Ethanol Report 02/05/2025
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., ADP Employment Change at 7:15 A.M., Trade Balance and Treasury Refunding at 7:30 A.M., Fed Barkin Speech at 8:00 A.M., S&P Global Composite PMI Final and S&P Global Services PMI Final at 8:45 A.M., ISM Services PMI, ISM Services Business Activity, ISM Services Employment, ISM Services New Orders, and ISM Services Prices at 9:00 A.M. EIA Energy Stocks at 9:30 A.M., 17-Week Bill Auction at 10:30 A.M., Fed Goolsbee Speech at 12:00 P.M., Dairy Products, Dairy Products Sales, and Fed Bowman Speech at 2:00 P.M., and Fed Jefferson Speech & Total Vehicle Sales at 6:30 P.M.
Purdue University’s Ag Economy Barometer and other indexes reflected an uptick in farmer optimism in January, which correlated with higher cash grain prices in all regions of the Midwest. The Ag Economy Barometer gained 5 points in January and was 35 points higher than in 2024, at 141. This was the highest in January since 2021. The Index for Current Conditions rose 9 points from December and was 6 points higher than a year ago at 109. The Future Expectations Index rose 3 points from December and was 48 points higher than a year ago. This was the most significant year-over-year increase since April 2021 and the 3rd largest increase on record. The Farm Financial Performance Index gained 13 points in January to a 2-year high, with farmers expecting that 2025 will be better than 2024. 40% of farmers thought US agriculture was at risk of a trade war, while 60% had no opinion or thought it was unlikely.
South American Weather Pattern Discussion
Rain Soaks Cordoba & Buenos Aires; Near to Below Normal Precipitation Forecast Across Brazil: The South American forecast is consistent in projecting the best rain in weeks across central Argentina in the next 48 hours. Cumulative totals are projected upward of 1.75-3.00”. Additional rain is forecast in Central and Northern Argentina in the 6-10 day period. Regional drought persists in Argentina mainly in the north and across La Pampa, but rain this week will impact the highest concentrated corn/soy producing area of the county. The EU model’s 10-day precipitation forecast in Argentina ^ S Brazil shows: Needed dryness will blanket Mato Frosso & Goias into the weekend. Regular showers return to N Brazil thereafter. And periodic rain will impact Mato Grosso do Sul & Parana in Brazil in the next 10 days. Following ARC’s tour of Brazil this week, rain in south-central Brazil is beneficial to soy pod filling there. The drier weather across Northern Brazil allows the harvest to accelerate and winter corn to be seeded.
Corn Retest Contract High on Hope for China/US Tariff Pause, Funds Return With Purchases of 11,000 Contracts on Speculative Inflows:
CBOT corn futures closed higher amid the hope that China would buy US corn as another “olive branch” to the Trump Administration on trade/tariffs. China retaliated against 10% US tariffs overnight in a measured way to hold open negotiation chances. US President Trump suggested that he would talk with Chinese President Xi early yesterday, but later in the evening he suggested that he was in no hurry to speak. In the overnight session corn futures are not blinking with funds adding to their net long position in yesterday’s action, and the knowledge President Trump will always listen to “common sense” fair negotiations that will bear fruit. Brazil’s ship lineup indicates that 1.00-1.50 MMT “could” be exported in February. USDA’s January WASDE projection of Brazil’s marketing year (Mar-Feb) was lowered 2 MMT to 39.5 MMT. ARC expects Brazil final exports will be 37.5-38.0 MMT. The charts show that corn export commitments are five standard deviations below the average level needed to meet USDA’s projection. Commitments accounted for 93.6% of projected exports vs. 100.2% last year and less than the 5-year average of 99.8% (range 87.0%-101.9%). ARC doubts China will secure US corn. A range trade of $4.60-$5.10 is forecast into spring.
US Ethanol Yield Improves on Corn Dry Matter:
The official US ethanol yield in November was 2.99 Gal/Bu, a new record, compared to 2.90 the previous year. Abnormally low corn seed moisture content aids the industrial and feed industries. Due to less seed moisture, less corn is required to produce a gallon of ethanol or a pound of meat. This should be reflected in US corn feed/residual use in coming quarterly reports. ARC estimates that the US ethanol yield at or just above 3.00 Gal/Bu. Ethanol grind remains strong. But ARC doubts USDA will hike its industrial corn use forecast by more than 25 Mil Bu through the balance of the crop year. In fact, the higher ethanol production rate could cause WASDE to lower its corn grind rate for ethanol by 25-50 Mil Bu. Assuming EIA ethanol data, ARC pegs ethanol production in September and January at 6.9 Bil Gal, up 5% year-over-year. However, corn used for ethanol production in September and January is estimated at 2.3 Bil Bu, up 2.8% year-over-year. This is above the USDA annual forecast, but US ethanol grind is forecast to slow.
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Questions? Ask Dan Flynn today at 312-264-4374Daniel Flynn