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Corn And Ethanol: Heading Lower With Crude

Published 06/15/2020, 10:40 AM
Updated 07/09/2023, 06:31 AM
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In corn, we are still seeing a weak overall export market, narrow trading ranges, continued fund selling and lack of farmer selling at these price levels, which pretty much summarizes Friday's trading action. We start the week with cooler-than-normal temperatures and on Turn-Around Tuesday, we will see the mercury rising and possibly hit 90 degrees by Wednesday in most of the Corn Belt with intermediate rains. This should be conducive to a healthy strong crop, as we get the Crop Progress data later today. July corn is currently trading at 328 ½ which is 1 and a ½ of a cent lower. The trading range has been 328-330.

On the ethanol front, Alex Snodgrass with Independent Commodity Intelligence Services (ICIS) has sources telling him that ethanol producer Flint Hills Resources is permanently closing its 120m gal/year ethanol plant in Camilla, Georgia. The plant has been idle since May, as the coronavirus outbreak hampered fuel ethanol demand. While fuel ethanol is seeing some recovery, it is still 20-30% where it was last year. Fuel ethanol producers have seen little to no margins for some time, forcing many to idle or cut production. Ethanol is used as a gasoline blendstock, in pharmaceuticals, such as hand sanitizers and in food and beverage, such as in vodka. There has been smaller-than-usual ethanol commodity participation as well. There were no trades posted in the overnight electronic session. The July contract settled at 1.198 and is currently showing 1 bid @ 1.127 and 1 offer @ 1.240 with Open Interest at 72 contracts.

Crude oil continues to decline from the $39-and-change levels seen earlier this month, due to fears of another wave of COVID-19 infections. This also has weakened the stock market. Despite production cuts, the market is twitching with an eerie feeling over the demand outlook, given the prospect of some states retreating on their previous plans to ease lockdowns. July crude is currently trading around $35.20, or around 3% lower. The trading range has been $34.36-36.12.

The natural gas market continues a steady-to-lower pattern, with continued weakness, given the global glut, among other fundamentals we have discussed. We expect to see new selling, unless there is a spike in prices, or the current downtrend bottoms out. Some analysts are predicting this is the next commodity to go into negative territory and most likely will not recover as quickly as crude oil has. In the overnight electronic session the July natural gas is currently trading at $1.680 per mmBtu, down nearly 3%. The range has been 1.714-1.761.

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