We kicked off the day with Core Inflation Rate MoM & YoY, Export Sales, Inflation rate MoM & YoY, CPI, CPI s.a., Initial Jobless Claims, Continuing Jobless Claims, and Jobless Claims 4-Week Average at 7:30 A.M., EIA Natural Gas Storage at 9:30 A.M., 4-Week & 8-Week Bill Auction at 10:30 A.M., 15-Year & 30-Year Mortgage Rate at 11:00 A.M., Fed Barkin Speech at 11:40 A.M., 30-Year Bond Auction at 12:00 P.M., and Monthly Budget Statement at 1:00 P.M.

The Strategic Petroleum reserves Stocks inventory rose for the 4^th consecutive week, but 606,000 BBLs. Liquidation came to an end in early 2023 but resumed for 15 weeks starting in April, and since July, The SPR has been unchanged or higher nearly every week. The average weekly increase since July has been 317,000 BBLs/week. This pales in comparison to the average weekly liquidation in 2022 of 4.2 Mil barrels. Stocks are off the lows, but compared to a year ago are still 16 Mil BBLs less. Surprisingly, commercial crude oil stocks have remained stable following the end of SPR liquidation. This is due to record oil production that has reached a record 13.2 Million (bpd). Also, this mornings natural gas storage is expected to see stockpiles down 119 bcf. This compares to a withdrawal of 25 bcf a year ago and the 5-Year Average decline of 89 bcf.

Photo by Wouter Supardi Salari on Unsplash

South American weather forecast is broadly consistent with prior runs calling for soaking rain for Argentina into Jan 20^th, with additional rain across North Brazil into the weekend, but drier trend into late January. The Brazilian forecast isn’t outright bullish, but new production concerns have drifted southward from Mato Grosso into Mato Grosso do Sul, Parana, and Sao Paulo (25% of Brazilian soybean area)> 30-day rainfall there sits at 10-50% of normal. Incredible heat has been in place in MGDS/Sao Paulo so far in January. Max temps recorded in the last two days, with readings of 96-106 degrees widespread. It’s this year’s that’s been driving Brazilian soy production estimates downward. A sizable recovery in Argentine output lies ahead. Key in Brazil is whether next week’s warm/dry pattern is extended into late month. There have been a few showers, but regular rains are now required for trend corn and soybean yields. CONAN’s Brazilian corn production estimates caps 23/24 exports at 46 MMTs, down 9MMTs (350 Mil/bu) from last year. It’s imperative that the wet season this year extends to late April. Safrinha yield loss of 5% from CONAB’s current estimates lowers Brazilian corn production & exports another 5 MMT’s. Brazilian weather becomes paramount to feed markets from Feb 1^st onward. Rainfall in Mato Grosso of 4” or more will be needed in April to assure trend Safrinha corn yields.

The overnight rally does not appear to be based on any new information. However, China has returned to normal booking of Brazilian soybeans. China was absent of 2024 leaving questions of their future demand intentions. Sinking Brazilian export premiums and the slide of CBOT prices have pulled Chines crush margins into the green. And the funds keep the pedal to the metal, with Chicago wheat open interest gain 4,171 contracts, corn 11,587, and soybeans 12,542 contracts. Soybean oil was up 7,532 and soybean meal was up 6,139 contracts. Combined CBOT grain open interest was up nearly 40,000 on Wednesday. Cannot stress enough corn open interest has been rising everyday since mid-December with net-short positions. Buckle up your chinstrap for tomorrows Crop Production, Grain Stocks, USDA Supply/Demand Winter Wheat Seedings and WASDE data.

On the Ethanol Front the EIA boosts forecasts for 2024 fuel ethanol production increasing both its estimate for 2023 fuel ethanol production and forecast for 2024 fuel ethanol production in its latest short-term outlook, released Jan 9^th. The EIA currently estimates that US ethanol production averaged 1.02 million (bpd) in 2023, up from last month’s forecast od 1.01 million (bpd). The agency also increased its forecast for 2024 fuel ethanol production to 1.02 million (bpd), up from the forecast of 1 million (bpd) included in its December STEO./ In addition, the January STEO includes the EIA’s first short-term forecast for 2025, with the agency predicting fuel ethanol production will continue to average 1.02 million (bpd) next year. On a quarterly basis, fuel ethanol production is expected to average 1.02 million (bpd) during the first quarter of this year, falling to 1.01 million (bpd) in the 2^nd & 3^rd quarters, 1.01 million (bpd) in the 3^rd quarter, and 104 million (bpd) in the 4t quarter. The full story can be found with Erin Voegele with Ethanol Producer Magazine.

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