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 Building Permits Final, Building Permits MoM Final, Home Sales, and Home Sales MoM at 9:00 A.M., Fed Cook Speech at 11:00 A.M., Baker Hughes Oil & Total Rig Count at 12:00 P.M., Cattle on Feed & Cold Storage at 2:00 P.M.
Fed Chair Jerome Powell speaks on Sunday at 1:40 P.M. on Memorial Day Weekend. Will anybody be listening? Does it matter? High bond yields are stuffing forward progress of the economy and economic growth. Too Late Jerome is late to the dance. Again. We need him to cut interest rates. By the time he reacts that ship has already sailed. He has done enough speech’s with no action. In the meantime the Trump Administration completed the first step to push the Big Great Deal through the House and needs continued support to get it through the Senate providing the US taxpayer a much needed and well deserved biggest tax cut in US history Hopefully we will get the proposal through the Legislative process by the next summer holiday the 4th of July. The National Association of Realtors reported that existing home sales in April declined by 20,000 homes to 4 Mil homes. Compared to a year ago, sales were down 3%, marking the 2nd consecutive month of year-over-year declines. While sales volume declined, the median home sales price lose 3% from March and was 2% higher than last year at $414,000. At the same time, the inventory of unsold homes increased by 9% from March was 21%higher than a year ago at 1.45 Mil homes. This was the largest inventory figure since September 2020. At the same time, interest rates continue to inch higher, with yield on the 10-Year Note this week at a 16-week high of 4.5%, and slightly above a year ago, nudging 30-Year mortgage rates back t 7%.
US Weather Pattern Update
Central US Drought Shrinks; Forecast Favorable into June 5th:
The US forecast is considered nearly ideal. Drier weather lies ahead for N Plains and Midwest, with temps to warm to more normal levels beginning June 1st . Additional light/moderate rain is forecast in KS and NE this weekend, which adds to the moisture available to the US HRW crop. Drought conditions changed in coverage in the past week. As expected, further drought erosion was recorded in IA, NE, the Dakotas, ands MN. Drought now covers just 22% of the US Corn Belt and 16% of the soybean planted area. If 5-day forecasts are verified, modest improvement in soil moisture occurs in central/eastern KS and NE. This supports high US summer row crop expectations. US water availability concerns will be absent the next 2-3 weeks. Extreme heat stays absent. It’s down to whether heat/dryness arrives during pollination during July across the Midwest/Plains/Delta. Estimating total EU wheat production will be challenging given highly varible growing conditions this spring, but Ag Resources (ARC) notes France is the largest producer of wheat and corn. Above normal temperatures will accelerate moisture loss in Russia, and highs in the upper 80’s will be common there after this weekend. In June, both wheat and corn crops will need rain in N Ukraine and S Russia. June weather is critical in determining Russian winter wheat yield.
Mexico Corn
Mexican weather is improving. Monsoonal rainfall will expand northward over the next two weeks, with soaking totals of 2-4” forecast in key summer-producing areas in the south and southwest of the country. The arrival of this moisture is rather timely and will allow corn seeding to occur within optimal windows. Irreversible damage has been done to the winter corn crop, which is grown in northwest Mexico, but winter corn only accounts for only 30% of Mexican output. If the EU model is verified 30% of normal rainfall is anticipated. Like Brazil, rainfall in Mexico is consistent once the monsoon arrives, so corn yield catastrophe will be avoided in 2025. This is different than the past 2 years, but the impact on Mexico’s corn demand from the US is debated. However, larger-or-smaller – Mexican corn production will not materially impact supply, demand, and the need for imports. Note that Mexico plants only 15-17 Mil acres of corn. Yield has been confined to a range of 57-65 BPA since 2015. Even enlarged swings in yield have only minimal impact on crop size/total supply. Mexico continues to operate at a deficit of 24/25 MMT’s annually, with yellow feed corn supplied by the US. USDA in its May report pegged Mexican corn yield at 383 MT/HA, 2$ below the mathematical trend. Imports are forecast at 25 MMT’s, which matches 24/25’s record. Mexico must import 23 MMT’s of corn to meet its rising domestic use. Also, assuming a yield of 5% below the trend, Mexican imports will be only 300,000 Mt’s above USDA’s forecast. Mexico offers the US a stable customer. US cash corn prices hold a sizable freight advantage into Mexico relative to South American offers, and ARC expects Mexico to fill 96-99% of its import needs from the US. This implies US corn exports to Mexico in 2025/26 of 920-970 Mil Bu. Monthly exports to Mexico don’t fluctuate meaningfully, but a weaker pace of exports occurs in May-June. This is followed by the return of robust exports during July-November. Record/near-record Mexican corn imports provide a base for total US corn exports of 2.1-2.2 Bil Bu. It isn’t easy to place new crop US corn exports below this level. The degree of which 25-26 exports exceed this will hinge upon Jun-Aug weather in Canada, Europe, and the Black Sea with demand shifting back to the US. Nearby, Brazil will capture a significant share of world demand.
Corn Comments & Analysis
CBOT July Corn Firms; USDA to Raise 24/25 US Exports 100 Mil Bu:
Corn futures ended steady to higher. US export demand remains resilient, and while the spring sales pace has peaked, ARC analysis suggests another meaningful hike in US corn exports occur in June. USDA/NASS won’t adjust feed/residual use until July, implying that 24/25 US end stocks will be projected at a historical tight 1,315-1,365 Mil Bu. Current US export commitments of 2,491 account for an abnormally large 96% of USDA’s annual forecast. Even amid lower summer feed use, the US & N Hemisphere cash markets will be tight into September. It’s the old crop tightness that supports December futures nearby. However, ARC’s concern beyond May is the favorable nature of US weather triggering normal seasonal bearish price trends through summer. Barring dire Midwest weather, end users moving forward will be less reluctant to chase rally/extend supply coverage beyond August. Be prepared to add to 2025 hedges on a modest further rally. A seasonal peak in the next 10-15 days would be routine from a historical perspective.
Our Prayers to All the Brave Men & Woman That Served and Serving Our Country! We Will Never Forget OUR Veterans!
Time For Fed to Make a Move. The Corn & Ethanol Report 05/23/2025
We kickoff the day with Building Permits Final, Building Permits MoM Final, Home Sales, and Home Sales MoM at 9:00 A.M., Fed Cook Speech at 11:00 A.M., Baker Hughes Oil & Total Rig Count at 12:00 P.M., Cattle on Feed & Cold Storage at 2:00 P.M.
Fed Chair Jerome Powell speaks on Sunday at 1:40 P.M. on Memorial Day Weekend. Will anybody be listening? Does it matter? High bond yields are stuffing forward progress of the economy and economic growth. Too Late Jerome is late to the dance. Again. We need him to cut interest rates. By the time he reacts that ship has already sailed. He has done enough speech’s with no action. In the meantime the Trump Administration completed the first step to push the Big Great Deal through the House and needs continued support to get it through the Senate providing the US taxpayer a much needed and well deserved biggest tax cut in US history Hopefully we will get the proposal through the Legislative process by the next summer holiday the 4th of July. The National Association of Realtors reported that existing home sales in April declined by 20,000 homes to 4 Mil homes. Compared to a year ago, sales were down 3%, marking the 2nd consecutive month of year-over-year declines. While sales volume declined, the median home sales price lose 3% from March and was 2% higher than last year at $414,000. At the same time, the inventory of unsold homes increased by 9% from March was 21%higher than a year ago at 1.45 Mil homes. This was the largest inventory figure since September 2020. At the same time, interest rates continue to inch higher, with yield on the 10-Year Note this week at a 16-week high of 4.5%, and slightly above a year ago, nudging 30-Year mortgage rates back t 7%.
US Weather Pattern Update
Central US Drought Shrinks; Forecast Favorable into June 5th:
The US forecast is considered nearly ideal. Drier weather lies ahead for N Plains and Midwest, with temps to warm to more normal levels beginning June 1st . Additional light/moderate rain is forecast in KS and NE this weekend, which adds to the moisture available to the US HRW crop. Drought conditions changed in coverage in the past week. As expected, further drought erosion was recorded in IA, NE, the Dakotas, ands MN. Drought now covers just 22% of the US Corn Belt and 16% of the soybean planted area. If 5-day forecasts are verified, modest improvement in soil moisture occurs in central/eastern KS and NE. This supports high US summer row crop expectations. US water availability concerns will be absent the next 2-3 weeks. Extreme heat stays absent. It’s down to whether heat/dryness arrives during pollination during July across the Midwest/Plains/Delta. Estimating total EU wheat production will be challenging given highly varible growing conditions this spring, but Ag Resources (ARC) notes France is the largest producer of wheat and corn. Above normal temperatures will accelerate moisture loss in Russia, and highs in the upper 80’s will be common there after this weekend. In June, both wheat and corn crops will need rain in N Ukraine and S Russia. June weather is critical in determining Russian winter wheat yield.
Mexico Corn
Mexican weather is improving. Monsoonal rainfall will expand northward over the next two weeks, with soaking totals of 2-4” forecast in key summer-producing areas in the south and southwest of the country. The arrival of this moisture is rather timely and will allow corn seeding to occur within optimal windows. Irreversible damage has been done to the winter corn crop, which is grown in northwest Mexico, but winter corn only accounts for only 30% of Mexican output. If the EU model is verified 30% of normal rainfall is anticipated. Like Brazil, rainfall in Mexico is consistent once the monsoon arrives, so corn yield catastrophe will be avoided in 2025. This is different than the past 2 years, but the impact on Mexico’s corn demand from the US is debated. However, larger-or-smaller – Mexican corn production will not materially impact supply, demand, and the need for imports. Note that Mexico plants only 15-17 Mil acres of corn. Yield has been confined to a range of 57-65 BPA since 2015. Even enlarged swings in yield have only minimal impact on crop size/total supply. Mexico continues to operate at a deficit of 24/25 MMT’s annually, with yellow feed corn supplied by the US. USDA in its May report pegged Mexican corn yield at 383 MT/HA, 2$ below the mathematical trend. Imports are forecast at 25 MMT’s, which matches 24/25’s record. Mexico must import 23 MMT’s of corn to meet its rising domestic use. Also, assuming a yield of 5% below the trend, Mexican imports will be only 300,000 Mt’s above USDA’s forecast. Mexico offers the US a stable customer. US cash corn prices hold a sizable freight advantage into Mexico relative to South American offers, and ARC expects Mexico to fill 96-99% of its import needs from the US. This implies US corn exports to Mexico in 2025/26 of 920-970 Mil Bu. Monthly exports to Mexico don’t fluctuate meaningfully, but a weaker pace of exports occurs in May-June. This is followed by the return of robust exports during July-November. Record/near-record Mexican corn imports provide a base for total US corn exports of 2.1-2.2 Bil Bu. It isn’t easy to place new crop US corn exports below this level. The degree of which 25-26 exports exceed this will hinge upon Jun-Aug weather in Canada, Europe, and the Black Sea with demand shifting back to the US. Nearby, Brazil will capture a significant share of world demand.
Corn Comments & Analysis
CBOT July Corn Firms; USDA to Raise 24/25 US Exports 100 Mil Bu:
Corn futures ended steady to higher. US export demand remains resilient, and while the spring sales pace has peaked, ARC analysis suggests another meaningful hike in US corn exports occur in June. USDA/NASS won’t adjust feed/residual use until July, implying that 24/25 US end stocks will be projected at a historical tight 1,315-1,365 Mil Bu. Current US export commitments of 2,491 account for an abnormally large 96% of USDA’s annual forecast. Even amid lower summer feed use, the US & N Hemisphere cash markets will be tight into September. It’s the old crop tightness that supports December futures nearby. However, ARC’s concern beyond May is the favorable nature of US weather triggering normal seasonal bearish price trends through summer. Barring dire Midwest weather, end users moving forward will be less reluctant to chase rally/extend supply coverage beyond August. Be prepared to add to 2025 hedges on a modest further rally. A seasonal peak in the next 10-15 days would be routine from a historical perspective.
Our Prayers to All the Brave Men & Woman That Served and Serving Our Country! We Will Never Forget OUR Veterans!
God Bless!
Have A Great Trading Day!
Thanks,
Dan Flynn
Questions? Ask Dan Flynn today at 312-264-4374