Dec corn up 1 ½ at $3.70
Nov beans up 3 ¾ at $9.9975
The DOW is up
USD is weaker
Crude oil down $.39 at $36.94
Corn bulls are a little disappointed as the USDA only trims production by -378 million bushels, dropping yield from 181.8 down to 178.5 and harvested acres lowered from 84.023 down to 83.5. Bulls point to the fact “harvested acres” in Iowa were lowered by -1 million and Nebraska lowered by -350,000, both major producing states that could bring a much greater reduction in total U.S. production, which was lowered from 15.278 billion down to 14.900, but still stands well above last years 13.617 billion. Bears point to the fact the USDA still sees a very big crop and the fact overall demand was lowered by -100 million bushels despite the recent wave of Chinese buying. Net-net, bears argue U.S. ending stocks at 2.503 billion bushels is still comfortably above last years 2.228 billion and not a reason to add additional risk-premium to our current price.
Soybeans bulls are happy to see U.S. ending stocks lowered from 610 million down to 460 million. Perhaps most exciting to the bulls is the fact the USDA left demand “unchanged”, meaning the balance sheet could get trimmed more in the coming reports as both “crush” and “exports” look as if they could be bumped higher. The USDA lowered its U.S. yield estimate from 53.3 down to 51.9, but bulls believe that number could also end up working itself lower. The USDA also left “harvested acres” unchanged at 83.020 vs. 74.951 last year, again, bulls are thinking this number could ultimately be reduced, not raised higher. If we get ending stocks sub-400 million on lower harvested acres or perhaps a lower yield and demand stays strong we could have much higher prices as a “demand-driven” bull can get up and run.
Over the weekend president Trump said that retail gas stations selling E-10 could now offer E-15 gasoline nationwide if their state government provides approval. Before we get overexcited we have to remember unleaded gasoline is actually selling much cheaper than ethanol at the moment. Meaning it doesn’t really make a ton of financial sense. However, it is a step in the right direction and could provide a longer-term tailwind for ethanol.
Brazil’s government will extend a tariff-free ethanol import program with the United States for 90 days starting Sept. 14, the foreign ministry said in a statement on Friday. During that time, the United States and Brazil will discuss ways in which they can open up their respective ethanol, soy, and corn markets, the statement said. Brazil allowed a non-tariff quota for imports of 750 million liters per year of ethanol to expire at the end of August, resulting in U.S. producers having to pay a 20% tariff. The next tariff-free regime will apply only to the first 187.5 million liters of ethanol, the Economy Ministry’s foreign trade body said in a separate statement on Friday.