Debating China’s Import Appetite. The Corn & Ethanol Report

We started off the day with Consumer Inflation Expectations (NOV) and Export Inspections at 10:00 A.M., 3-Month and 6-Month Bill Auction at 10:30 A.M.

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On the Corn front talk on the trade front showed some traders disappointed with the USDA’s report, with modest cuts to world stocks and the South American crop was not enough to keep the upward momentum moving.

The USDA did raise estimates on China imports and that’s where the debate begins with the viewpoints of China imports going much higher, while the other group is thinking they will stay on the side the rest of the year. Arlan Suderman with Stone X was quoted, “we think it’s going to come down to export rumors of being primarily perpetrated by a couple of grain companies who have something to gain from big imports, ”he went on to say, “And exports very well go up, but that would go against some major objectives of the Chinese Communist Party. And the Chinese Communist Party has a record of standing in the way of some of its own agency objectives at times to reach that objectives. So, we think it’s going to hold a line on imports, probably to 12 million metric tons.” Darren Frye of Water Street Solutions, opinion differs from Suderman’s. He expects China exports will grow, as China needs feed grain this year. I agree with Frye’s assessment, but then again, that what makes a market. In the overnight electronic session, the March corn is currently trading at 426 ½ which is 3 cents higher. The trading range has been 428 ½ to 423 ½. Today is the Last Trading Day on December Grain Contracts which could add another wrinkle to today’s trading.

On the Ethanol front, the industry is realizing the other benefits of the commodity to the general public in ways we rarely think of. For instance, when the COVID-19 closed plants across the Midwest, among the suspected outcomes were a shortage of CO2 for the food and beverage industry. According to the Renewable Fuels Association, American ethanol plants capture 3 to 3.5 million tons of CO2 each year during the production process. That equates to 40% of the national supply of CO2 that’s used for beverages and dry ice production. One bushel of corn, or about 56 pounds of corn, that’s processed via the dry mill biorefinery process can produce 16.5 pounds of biogenic carbon dioxide along with 2.92 gallons of denatured fuel ethanol. Dry ice is CO2 in its solid form and is used in ways from shipping foods at stable cold temperatures or to create spooky mist effects on Halloween or creating mist at a rock concert. But how this industry was leveled by the COVID19 the irony is simple, it will play a critical role in the race to get the COVID19 vaccine to the public. There were no trades posted in the overnight electronic session. The January ethanol settled at 1.320. The market is currently showing 1 bid @ 1.250 and 2 offers @ 1.400 with Open Interest remaining at 32 contracts.

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