The Corn & Ethanol ReportDaniel Flynn
The Corn & Ethanol Report 06/03/2020
Tropical Storm Cristobal Spinning in the Gulf of Mexico
We start off the day with MBA Mortgage Applications and MBA 30-Year Mortgage Rate at 6:00 A.M., ADP Employment Change at 7:15 A.M., Markit Composite PMI Final and Markit Services PMI Final (May) at 8:45 A.M., Factory Orders and ISM Non-Manufacturing Index at 9:00 A.M., EIA Energy Stocks at 9:30 A.M. and Dairy Product Sales at 2:00 P.M.
On the Corn front we will be watching the path of Tropical Storm Cristobal which is forecast to move northward along the coast of Mexico and could impact this weekend the U.S. Gulf Coast from Texas to the Florida Panhandle with risk of storm surge, rainfall and wind impacts. We will no doubt be following the storms track as it makes landfall. There has been plenty of rains in the Corn Belt and if the hot weather persist this week hopefully, it will soak up a lot of existing moisture if the track will hit us head on and bring milder temperatures. And with the corn and soybeans planting progress is way ahead of last years pace and the crops are in great shape in the early going, you may see investors jump back into the long soybeans and short corn spreads. But export doubts play a critical role if this play would work again. In the overnight electronic session the July Corn is currently trading at 322 which is 2 1/4 cents lower. The trading range has been 324 1/4 to 322, and we are looking at tight trading ranges again.
On the Ethanol front the industry begins a slow recovery. Nebraska Ethanol Board Chairman Jan ten Bessel also a farmer in Cambridge, Nebraska says he is confident the ethanol industry will recover from the demand destruction caused by the coronavirus pandemic. "What were seeing today is a little bit of what agriculture would be without ethanol," tenBessel says. "But I believe this will come back, maybe slowly at first, but will come back." He says Nebraska ethanol plants that were shut down are starting back up. "As people start driving again and people getting out, those supply lines are moving again." The June ethanol expires today and there were no trades in the complex overnight. The July contract settled at 1.148 and is currently showing 1 bid @ 1.123 and 1 offer @ 1.165 with Open Interest at 114 contracts.
On the Crude Oil front we had a surprise draw which shot prices up even further yesterday. OPEC and OPEC+ are expected to meet tomorrow and are considering extending their production cuts of 9.7 million barrels per day (bpd), or about 10% of global production, into July, August or September 1st, with a meeting before to decide the next steps. Analyst at Fitch Solutions Country Risk and Industry Research (Fitch Solutions) have increased their forecast prices for Brent Crude for 2020 and beyond. In the overnight electronic session the July Crude Oil is currently trading at 3616 which is 65 points lower. The trading range has been 3818 to 3588. Don't forget the EIA Energy Stocks at 9:30 A.M.
On the Natural Gas front the talk is the next major market for U.S. LNG is Turkey which is cutting ties with Russia. We are already on the cusp to become the worlds largest LNG exporter ahead of Qatar and Australia. Bloomberg reports that Natural Gas could be the next commodity to trade negative with a glut in Europe causing them to drop prices and all of these factors weigh on cheap prices and a bad outlook for producers. Unlike, the oil market there has been no coordinated response to address the glut and the fallout could be deeper and longer. However, the market has the winds behind it's sails this morning gaining premium most likely based on Tropical Storm Cristobal. In the overnight electronic session the July Natural Gas is currently trading at 1.817 which is 4 cents higher. The trading range has been 1.822 to 1.771.
Have a Great Trading Day!
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June 4th, 2020
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