Grains Off & Running. The Corn & Ethanol Report

We kicked off Cinco De Mayo with MBA Mortgage Applications (30/APR) and MBA 30-Year Mortgage Rate (30/APR) at 6:00 A.M., ADP Employment Change (APR) at 7:15 A.M., Fed Evans Speech at 8:30 A.M., Market Composite PMI Final (APR), Market Services PMI Final (APR) and ISM New York Index (APR) at 8:45 A.M., ISM Non-Manufacturing Index at 9:00 A.M., EIA Energy Stocks at 9:30 A.M., Fed Rosengren Speech at 10:00 A.M., Fed Mester Speech at 11:00 A.M., Dairy Product Sales and Fed Evans Speech at 2:00 P.M.

green grass

Source: Unsplash 

On the Corn Front funds have an estimated net-long position of 417,000 contracts of corn. Farmers that I have spoken to still have corn they have yet to sell, while whispers out there saying that China would take all unshipped U.S. corn is sparking interest in the market. Not to mention we have weather forecasts calling for more tough planting conditions in the next two weeks. The farmers obviously will do what they can to get the crop in the ground as I mentioned in yesterday’s report. Conditions are too wet in MO,LA,AR,IN and OH, while conditions in the West Mid-West, Pacific Northwest, and the U.S. Northern Plains. Make no mistake about it this is a demand-driven market with weather always hanging over our head. And here is a start to back up what I am saying, it took 2,400 days for corn to get above $5 then 99 days to get above $6, and now just 14 days to get above $7 and analyst are calling for $8 corn soon. This will invite volatility but with a longer term play you can strategize your positions with options because we will be trading higher and higher again this year. In the overnight electronic session, the July corn is currently trading at 698 ½ which is 1 ¾ cents higher. The trading range has been 702 ¼ to 692 ¼.

On the Ethanol front, margins are improving and exploding exports aided by China’s second-largest monthly shipments on record. And with $7 corn and soaring energy prices we will see ethanol follow suit. The Renewable Fuels Association (RFS) says China’s buying increased to 48.3 million gallons in March, which is the second-largest monthly export total ever on record, just missing the high set in April 2016. U.S. ethanol also saw increased interest from Canada, with shipments up by 85%, marking a four-month high. The May contract expires today, while the June contract settled at 2.340 and had no trades or any market made at the moment with Open Interest at 20 contracts.

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