Inflation Steeling WASDE’s Thunder. The Corn & Ethanol Report

We kicked off the day with Export Sales, PPI MoM & YoY, Core PPI MoM & YoY, PPI, Initial Jobless Claims, Continuing Jobless Claims, Jobless Claims 4-Week Average, PPI Ex Food, Energy, and Trade, and PPI Ex Food, Energy, and Trade MoM & YoY at 7:30 A.M., Fed Williams Speech at 745 A.M., EIA Natural Gas Storage at 9:30 A.M., 4-Week & 8-Week Bill Auction at 10:30 A.M., Crop Production, USDA Supply/Demand, WASDE, Fed Collins Speech, and 15 & 30-Year Mortgage Rate at 11:00 A.M., 30-Year Bond Auction at 12:00 P.M., and Fed Bostic Speech at 12:30 P.M.

green-leafed plants

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With Crop production, USDA Supply/Demand WASDE and CONAB data match up the PPI and Jobless Claims should steel the show. After the morning inflation numbers as we digest the numbers we will see if those numbers put a wrinkle in the April grain reports. There are reports of the FED sounding more hawkish as inflation is taking its toll with the working class and there will be consequences at the ballot box, especially if there is no end in sight. Pre-report long term fundamentals, featuring Ukrainian corn priced to sell. US competitive with South America through summer. Ukraine’s war, freight and insurance cost challenges have kept fob premiums there deflated, which has allowed the Ukraine to capture market share in E Asia. Including China. Otherwise, unlike recent years, US Gulf corn at $490/Bu is not expensive in the world marketplace. Export Sales stay elevated relative to last year into June & July. Spot Argentine fob basis has rallied to $.70 over May CBOT. Brazilian corn isn’t quoted prior to July. US corn for delivery is offer $.12/Bu below Brazilian and at parity with Argen tin when all fobbing costs are added. This is much different than summer 2022 and 2023, when US corn was the high cost origin – due to tight stocks. A year ago April forward Brazilian offers were a full $.90-100/Bu below US Gulf origin! An outright collapse in US export demand is unlikely. Add disease pressures on Argentine corn is knifing production. Traders are waiting and will focus on South American crop sizes and the disparity between CONAB & WASDE data. Most expect a bearish US and world balance sheet. The Brazilian number holds the key, while Argentine disease concerns may lurk in their expected overall good to excellent growing year.

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