Today’s Prices
Grain price finished higher across the board today with the wheat leading the way on a question mark as to India’s crop and their export potential.
Grain Market News
Ethanol Profit Margin- Iowa
Last year corn prices rallied into the $8 range in early May and following corn prices moving into the $8 range profit margins were then negative in the late May-August timeframe.
Recently we’ve seen negative margins, but profit margins have improved through last week. We are hearing report that the e3thanol profit margins are 20-30 cents per bushel.
Soybean profit margins for the crushers is near record highs in and around the $3 per bushel range.
Ethanol Swaps- July 2022
Ethanol swaps we see the long-term trend for prices is higher, ethanol swaps is a price at which fuel, or cash ethanol is trading.
It did slip back here recently over the last couple weeks, but ethanol trading is about $2.64 per gallon.
Keep this number in mind as we look at gasoline prices.
Unleaded Gasoline
Gasoline prices are trading at 3.65 per gallon, that’s a $1 above the prices fuel ethanol is at.
Therefore, lenders will be very aggressive buying and using ethanol when it’s a $1 per gallon cheaper than gasoline and it’s also likely to result in very strong ethanol exports as well.
Crude Oil
Energy as a whole is strong; energy prices are in a long-term uptrend.
That uptrend began when President Biden was elected on November 3, 2020, when crude oil prices were down at $33-34 per gallon.
Since Biden was elected and the policies of the current administration changed, energy and crude oil has been trending consistently higher.
There is a lot of talk about a Putin price height when Russia invaded Ukraine, certainly that gave us a spike but since then prices have come back but we are still in the same long-term uptrend.
We believe that uptrend will continue and will not be surprised to see crude oil prices testing previous highs at some point.
Weekly Ethanol Production
Ethanol production did increase slightly from last week up to 969 thousand barrels per day but still below the level needed to reach USDA’s corn use estimate.
With ethanol prices a $1 per gallon below the price of gasoline that’s going to promote strong use and ethanol margins have improved from where they were the past 3 months.
Ethanol export will likely be strong, and we believe ethanol production will likely increase up to the level that’s needed in the late May-July timeframe.
Weekly Stocks of Fuel Ethanol
Stocks are down for the 5th week in a row, still relatively high, but not burdensome at 23.89 million barrels.
With the demand from the blenders expected to be strong, demand from exports expected to be strong, we believe ethanol stocks will continue to decline seasonally and ethanol stocks should be at a very season level as we move into the mid-summer.
Grain Market News
7-Day Observed Precipitation
Yu can see that over the past 7 days we’ve had significant rain over almost the entire US corn and bean belt.
1-3 inches of rain has been quite common.
There were a few isolated areas that did have less than a half inch of rain, it’s possible these areas are getting some panting done.
The majority of the US corn and bean belt has seen substantial rain and slow to no progress is being made at this time.
There are bigger areas where we’ve seen less rain like the far southwestern plains unfortunately that’s not the heart of the US corn and bean belt, the far northern plains also not the heart, and the southeast US also not the heart.
U.S. Temperatures
In addition to the moisture we have seen, temperatures remain cool especially in the central and northwestern belt.
These temperatures aren’t going to cause damage but the temperatures this morning in the 30s are certainly going to slow the drying process but also for crops that have been planted germination is going to be delayed as well.
7-Day Precipitation Forecast
The forecast shows 1-2 inches of rain across much of the central, eastern, and southern belt.
This rain is going to be for the most part tonight, tomorrow, and into Friday. Then we have some rain that could enter into the northern plains in the late Saturday/Monday timeframe.
The bottom line is that although there will be some planting taking place here and there any major window is not going to happen in the near term.
Temperature Outlook
Looking ahead to next week the 6–10-day outlook is for May 9th-May 13th, that’s next week Monday through Friday.
The good news for areas of the central and eastern belt temperatures will be above normal and expected to be dryer in southern Illinois, Indiana, and Ohio.
Unfortunately, in the western and northwestern belt into the northern plains rain and possibly heavy rains are still in the outlook.
Further out in the 8-14 day, temperatures remain warmer especially in the central and eastern belt.
Precipitation near normal but again the one problem we are concerned about is additional rain above normal for the central, western, and northwestern belt.
Certainly, these areas could see some significant planting delays beyond what we are seeing today.
The long-term outlook is mixed in the 6-10 and 8-14 day.
June Corn Chart
Corn prices trading on both sides of unchanged, overall, what we see is a pattern where the corn market is now consolidating.
We’ve been in a similar range for 2.5 weeks, overhead resistance at 8.24 and chart support 7.80.
June Soybean Chart
Soybean prices have been chopping back and forth mostly in a sideways range for the last 2-3 months.
Prices are near the lower end of that range with technical indicators extremely oversold.
We do not want to be making any sales in soybeans at this time. We believe that the risk right now is to the upside in soybeans, we would not be surprised to see beans continuing an overall uptrend as we move through the month of May.
June KC Wheat Chart
Wheat has also been mostly in a choppy sideways range over the last 2-3 months.
Wheat prices like beans have moved towards the lower end of the range at chart support with technical indicators oversold for the first time going back to January.
With this in mind we do not want to be a seller of wheat, in fact if you are an end user of wheat this is likely a time to be adding some coverage.
We look for wheat prices to remain in the pennant formation that has developed and anything within that range is fair game heading into the May crop report a week from tomorrow.
There is more upside potential than there are downside risks from current levels.
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