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Today’s Prices
Grain markets higher today as weekly ethanol production was near all-time record large levels and that market is beginning to switch its attention from the supply side to the demand side for U.S. grain.
Grain Market News
Weekly Ethanol Production
It was near record large last week and even larger this week at 1.106 mbd. Just one week has been larger than this week and that was back in 2017. This week’s ethanol production was up 17.5% above the year ago level. Our YTD production is up 6.4%. USDA is estimating corn use for ethanol will be up 2.5%. That could continue for the next few months. The important take home point piece from this chart is that USDA is likely significantly underestimating the amount of corn that will be used in the ethanol industry this year.
Ethanol Production: % of Year Ago
This chart shows another of ethanol items shown as a year ago. USDA is estimating corn use for ethanol will be up 2.6%. Prior to harvest when corn was hardly available because we had almost ran out of supplies before the new crop began, ethanol production was below the year ago level and that was fairly disappointing back in September. Ethanol production has exploded to the upside now that new crop bushels are available and our YTD number has gone from below USDA’s number in Sept to well above USDA’s number here late in October.
Weekly Stocks of Fuel Ethanol
There was additional positive news, despite a near all-time record high level of ethanol production, ethanol stocks actually declined from last week indicating that domestic demand is very good, ethanol exports likely very strong at this time as well. U.S. ethanol prices are well below Brazilian prices and that should promote U.S. exports as typically year over year Brazil is cheaper than U.S. but right now U.S. is cheaper than Brazil. That should continue right into the winter.
Grain Market News
24-Hour Observed Precipitation
The next rain system moves into the Plains states last night and into today. We’re already seeing 1-2” of rain in portions of the eastern Plains. This system will be moving eastward quite slowly over the next 3 days.
U.S. Radar
As of early this afternoon you can see that frontal boundary from the Canadian border all the way down to the Gulf of Mexico. Mostly just steady rains with soaking total showing up.
7-Day Precipitation Forecast
The forecast shows generally 0.5-1.5” of additional rain. Over the next 3 days most of this rain will fall Wed, Thurs, and Fri and then we get into a relatively cool, dry pattern this weekend and into next week. Good news for the U.S. farmers, the NWS is not expecting this to be a prolonged wet event. Just 2-3 days of wet weather followed by relatively cool, dry conditions next week.
SA 2-Wk Precip vs Normal
In South America there are no immediate threats right now. Normal to above normal precipitation expected in Brazil over the next 2 weeks. In Argentina, there has been an improvement in their forecast and they’re now expecting mostly average precipitation over the next 2 weeks. La Nina is still building and we’ll continue to monitor that situation which could cause some issues during the growing season specifically in Argentina and southern Brazil with the heart of their growing season Nov, Dec, Jan, and Feb. We’re still in the planting season and have not yet entered the heart of the growing season in South America.
December Corn Chart
Corn prices exploded to the upside today. They were up 20-cents per bushel earlier in the day and that move has allowed us to make some adjustments to the overall chart given the previous range was primarily a sideways range and we’ve broken out of that range as of today’s move. Today’s high at $5.63 is the highest price going back to mid-Aug, over 2 months ago. Now we have solid chart support. That chart can be drawn off the Sept and Oct crop report lows. That now provides solid support in the $5.15-$5.20 range. Before we get too exciting about the chart formation, we need to get above this downtrend line and today’s close at $5.57 was slightly below that downtrend line. We need to see a solid close above it to get excited about the next potential target.
November Soybean Chart
Soybean prices took out last week high, posted a new high. It allowed us to make some slight adjustments to the overall chart formation. We still have a downtrend intact but that downtrend is being threatened from the upper end of our downtrend channel. If we can close above that level then $12.95 becomes the next target from a chart perspective. We still need to close above that downtrending channel. The good news is that the chart is still pointed upward and the technicals are still pointed upward as well so there is no sign of topping action in the soybean market yet.
December KC Wheat Chart
Wheat prices did not take out yesterday’s high. Did not take out yesterday’s low. That’s an inside trading day and indicates somewhat of consolidation as the market waits to see if there’s enough bullish news to keep the overall trend going. We noted yesterday that the long term trend is still pointed upward, the intermediate trend is still pointed upward, and the short-term trend is still pointed upward as well. One word of caution would be the technical indicators are overbought. That doesn’t mean we’ve seen the top but it does tell us to be a little bit cautious and the market may be getting a little overheated to the upside especially in the short term.
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