We kicked off the day with Dallas Fed Manufacturing Index at 9:30 A.M., Export Inspections at 10:00 A.M., 2- Year Note and 6-Month Bill Auction at 10:30 A.M., 3-Month Bill Auction and 5-Year Note Auction at 12:00 P.M. and Crop Progress at 3:00 P.M.
AG-Web covered a story if it is possible for Corn & Ethanol to go negative like the Crude Oil market did for the first time in trading history. CME CEO Terry Duffy countered and said this is not the first time a commodity went into negative territory. He said, “We have had Natural Gas go negative and other crude refined products go negative,” Duffy went on to say, “ It’s just wrong to say that”. Then the next question was could it happen to agriculture commodities as well? Darin Newsom of Darin Newsom Analytics said yes. It has been proven any storable commodity that continues to show increased supplies and demand being destroyed, an example would be corn. Seth Meyer, an economist with the University of Missouri, agrees it’s possible for anything to trade lower, but the difference between oil and corn is the ability to store it. “ In theory, I suspect it is possible for both grains and ethanol to go negative futures but it will be more difficult for grains given the wide delivery points and you can dump it on the ground, you cannot do that with oil storage,” Meyer said. “ For Ethanol, I think the risk is greater and those folks have been significantly cutting production as storage dries up. There is some play between oil/gas/ethanol storage. So, I think it is possible, but highly unlikely given the current market conditions. In Friday's action in the corn market we headed lower with managed funds net sellers of 6,000 corn. Whispers are funds are short 164,000. And estimates that 24% of plantings are done. In the overnight electronic session the May Corn is currently trading at 311 ¼ which is 4 ½ cents lower. The trading range has been 315 ¾ to 311 ¼.
On the Ethanol front, the demand picture is bleak and ethanol plants are slashing output. Currently, more than 70 ethanol plants have idled production and another 70 have reduced production. Still, ethanol stocks remain at record highs. Darin Newsom said, “The theory is if it cost more to stop production and restart it at a later date rather than pay someone to take supplies off your hands short-term”, Newsom said, We’ll see if this happens in the new-crop corn and/or soybeans, though $0 in those markets is the government loans, prices, or artificial floors.” Newsom went on to say,”It is counter-intuitive to me, to pay someone to take supplies off your hands but then again, start-up costs to get rigs and refineries running again could be more costly.” There were no trades posted in the overnight electronic session. The June ethanol settled at 0.956 and is currently showing 1 bid @ 0.854 and 1 offer @ 0.956.
On the Crude Oil front, Japan’s stimulus helped the U.S. Stock market but could not keep crude boosted with demand down with few people driving, flying or boating. The energies and products are taking a beating in the early going. In the overnight electronic session the June Crude Oil is currently trading at 1327 which is 367 points lower. The trading range has been 1698 to 1285.
On the Natural Gas front, the May contract expires tomorrow with the mini’s settling at cash tonight. If you are long or short a big contract it would be wise to roll over or liquidate now. For a speculator, deliveries are not fun anytime, but especially in the current market conditions, Your firm and their margin department may force you out anyway with the huge risk. In the overnight electronic session the June contract is currently trading at 1.835 which is 6 cents lower. The trading range has been 1.883 to 1.813.
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