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The Corn & Ethanol Report
By: Daniel Flynn | June 26, 2024

We kickoff the day with MBA 30-Year Mortgage Rate, MBA Mortgage Applications, MBA Mortgage Market Index, MBA Mortgage Refinance Index, and MBA Purchased Index at 6:00 A.M., New Home Sales and New Home Sales MoM at 9:00 A.M., EIA Energy Stocks at 9:30 A.M., 17-Week Bill Auction and 2-Year FRN Auction at 12:00 P.M., Dairy Products Sales at 2:00 P.M., Bank Stress Tests, Building Permits Final, and Building Permits MoM Final at 3:30 P.M.

Housing price data from the Federal Housing Finance Agency showed that the average price of single-family homes with mortgages backed by Fannie Mae and Freddie Mac rose by 0.2% in April and were 6.3% higher than a year ago. This marked the 8th consecutive month of 6% or more gains, and it put the FHFA House Price Index at a record high of 424.3. Across the 9 census divisions, year-over-year increase ranged from +3% in the West South-central region to +8.5% in the New England and Mid-Atlantic region. Flooding and excessive heat continue to drive fear in what the crops can produce with more rain here and more to come. This is rough and no end is in sight with Mother Nature globally, and a house next to the Rapidan Dam falls into the Ble Earth River. More damage is expected as we attempt to understand damage control in the immediate. Ad Resources Central US Forecast Mixed/Chaotic; Helpful Rain Impacts E Midwest; Drought Alert Offered to Southern Plains, Southeast, Southern Midwest: The Central US forecast features a wide range conditions into the first week of July. Helpful rain will linger across the eastern Midwest slowly across the Upper Midwest. Rapid drought development is forecast across the Southern Plains, Delta, and far Southern Midwest – while odds are high heat will be widespread in July. As I mentioned yesterday it’s a story of haves and have nots. And we will see if we can take advantage of global yields and fill the void. The major forecasting models, along with NOAA, agree that amplified high pressure Ridging will be anchored aloft the S Plains & Southeast. Temps in TX, OK, KS, LA, AR, TN, and KY in the 6-15 day period are projected in the upper 90’s/low 100’s. Ridge-riding storms are forecast elsewhere, and so it’s the exact positioning of this Ridge in early/mid-July that matters most. ARC fears the far southern and eastern Midwest will join the Southeast in facing heat & dryness in July. (A time that makes or breaks yields). Spot CBOT Corn Tests Spring Low; Ethanol Margins Best in Decade; US July Heats Up: Corn markets followed wheat lower as the speculative community embraces negative seasonal trends as needed rain falls across the Eastern Midwest. The market views US supply risk – acres, yield, and June 1 stocks – as limited to nonexistent, but at $4.25, spot futures, there’s just not much opportunity for the bears until late July/Aug weather is known. ARC relays that climate guidance agrees drought development across the S Plains, Delta, Midsouth, and Ohio Valley. Odds are high that heat blankets most of the Central US during July. A slowing of ethanol production in NW Corn Belt – due to flooding – has spiked ethanol cash prices and production margins. Gasoline stays strong into the end of summer. US weekly ethanol grind doesn’t peak seasonally until late July. It’ll be difficult for NASS June stocks & seedings data to lean bearish at depressed prices. Sales are not recommended amid a sharp drop in Brazilian corn production, confirmation of yield collapse in Argentina and as dryness re-emerges in Ukraine. Corn is too cheap! Cash basis bids for corn is also firming. Central Illinois corn is bid at 16 cents over and Cedar Rapids paying 24 cents over. The corn basis has some wondering if US June corn stocks will be less than 4,875 Mil Bu forecast. Stout Midwest cash basis bids, oversold technical indicators, erratic world weather and coming NASS reports has the bears wondering if its time to bank profits into the end of the month and quarter. The USDA June Stocks/Seedings Report is Friday and risk adjustment will be the theme into the historical unpredictable report. ARC looks for a modest fall in US corn and a rise in soybean acres. Once again, July weather makes or breaks US corn crops. Don’t forget the funds large net short positions.

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