We kicked off the day with Employment Costs – Benefits QoQ, Employment Costa – Wages QoQ, Employment Costs Index QoQ, PCE Price Index MoM & YoY, Core PCE Price Index MoM & YoY,Personal Income MoM, and Personal Spending MoM at 7:30 A.M., Fed Logan Speech at 8:30 A.M., Chicago PMI at 8:45 A.M., Fed Bostic & Fed Hammack Speech at 11:00 A.M., and Baker Hughes Oil & Total Rigs Count at 12:00 P.M.

The report from the EIA released on Thursday showed that in 2024, US biofuels production capacity growth slowed sharply during 2024, rising only 3% from early 2024 to Jan 2025. The main drag was in renewable diesel and other biofuels – such as SAF and renewable propane – where capacity increased by just 391 million gallons per year, a fraction of the gains in prior years. Most growth came from two California projects: Phillips 66’s Rodeo refinery conversion (now 767 Mil Gal/year) and a new 138 Mil Gal/Year Bakersfield plant by Renewable Fuels LLC. Several facility closures partly offset those gains. The slowdown reflects weak biofuel margins and a lack of forward EPA policy visibility. RVO and SRE decisions by the EPA could be put off until 2026. Ethanol production capacity, however, expanded modestly – mainly in the Midwest – reaching 18.5 Bil Gal annually and now comprising about 73% of total US biofuel capacity. With domestic demand stabilizing, most of the additional ethanol output will be directed towards exports.

Photo by Waldemar on Unsplash

US Weather Pattern Update

Extreme Drought Present in IL, IN & OH; Soil Moisture Improved Elsewhere:

On balance, the coverage of Central US drought continues to erode. Recent soaking rainfall has nearly eliminated drought from the Delta region, TN, and southern MI. Extreme/exceptional drought remains in place across pockets of E Midwest, but moisture improvement is expected in OH/PA over the next 48 hours. The change in drought coverage/intensity over the last 12 months is striking, particularly with respect to moisture available to winter wheat. ARC notes drought in late October 2024 covered 72-85% of Southern Plains, but today only covers 4-12% of TX, OK, and KS. The primary concern heading into late autumn/winter are negative soil moisture anomalies across the PNW.  Similar to Argentina & Southern Brazil, a weal La Nina has not negatively impacted precipitation patterns across TX and the Sothern US. La Nina ends before December.

Corn Comments & Analysis

Corn Drops as it was Excluded from US/China Trade Deal:

CBOT corn futures ended lower with South American fob markets heavy and lack of new bullish input. There’s no sign of Chinese demand for US corn, nor a sign China needs feed grains this crop year. China has been loath to secure Brazilian or Argentine corn for import amid its own domestic oversupply. Spot Dalian corn settled at $2.96/MT, down from $298 last week and $3.10 in late October 2024. Corn import margins into China are nonexistent. Recall China bought no corn from any origin in the 24/25 crop year, is a repeat ahead? Dec CBOT’s failure to breach its 200-day moving average sets up a test of $4.10-$4.16 in November – a seasonally bearish month for corn. ARC maintains that the weather in Argentina & Southern Brazil into January will dominate corn price discovery. 30% of Argentina’s corn will be near pollination without water issues – and there’s no sign of lasting dryness into mid-November. CBOT corn rallies will struggle with 1^st Notice Day against December. ARC argues that large nearby US corn exports reflect frontloaded demand from traditional buyers. Catch-up sales/hedges on any modest rally with resistance above $4.50 March.

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