July corn rallied 4 cents on fund short covering, a decent boost in weekly ethanol production and as Egypt’s tender results today triggered widespread uncertainty over the availability of Black Sea grain in the next 30-45 days. Active planting in the E Midwest through the next 48 hours (and all of this week) tempered the rally, but we maintain this is no place to turn bearish.
Ethanol production last week totaled 302 Mil Gal, up 6 Mil from the previous week and up a heady 8% from this week in 2016. The USDA’s ethanol demand draw still may be a bit too low (cumulative weekly ethanol production is up 5.1%; the USDA’s forecast is up just 4.3%). However, the rise in DDG production has weighed on cash DDG prices a bit this week, and ethanol stocks rallied to a new 6-week high 983 Mil Gal. ARC also notes that while Brazilian ethanol’s premium to US origin rests at 25%, the spread between Brazil and the US is narrowing. Brazil’s premiums were upwards of 45-50% in late 2016, and future export demand remains uncertain.
Crude rallied slightly, US crude stocks are in retreat, and an unwelcomed cool pattern will be established across the Central US beginning early next week. Both the bulls and bears will struggle for leverage, but we advise patience with respect to extending cash sales.
