Ethanol Production Numbers Should Continue to be Solid
[box type="download" icon="none"]Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets with trade ideas, take a Free Trial or find out more.[/box] Sinograin sold 641,628 tonnes out of 893,161 tonnes offered of 2014 corn at auction this morning. The 2017-18 global corn output could reach a record of 1.06 billion tonnes, up 5 million tonnes, according to the U.N. FAO report. They cite higher output in Latin America and former Soviet Union states. December corn traded to a high of 362 and settled at 361 yesterday, this was the highest settlement since August 21st. US exporters announced the sale of 253,300 tonnes of corn to Mexico yesterday. The average estimates from Bloomberg for next Tuesday's USDA report has the corn yield at 167.9 bushels per acre in a range from 165.5 to 171.2 bushels per acre. The August USDA estimate was at 169.5 with production at 14.153 billion bushels. The spread between the high estimate and the low estimate is 5.7 bushels and shows the variance that crop scouts continue to find this late in the growing season. If the yield were to come in at 165.5 bushels per acre, the ending stocks would decline to 1.787 billion bushels and a 12.5% stocks to usage. In contrast a 171.2 bushels yield would put ending stocks at 2.263 billion bushels and a 15.8% stocks to usage.
A yield on the high end could take nearby corn back down to the 340 level while a yield on the low end could push prices back up to the 400-410 level especially with the trend following funds short close to 70,000 contracts. The latest 6-10 and 8-14 day outlook continues to forecast below normal precipitation for the entire corn-belt through September 20th. This is not ideal finishing weather for the corn crop especially with the maturity level in corn at only 10% compared to the five year average 18%. The open interest in corn went up 8,752 contracts yesterday. The average estimate for today's ethanol production report is 1.039 million barrels per day in a range of 1.01 to 1.05 million. Stockpiles are estimated at 21.3 million barrels in a range of 21.2 to 21.503 million barrels.
TODAY'S MARKET IDEAS: December corn closed at the highest level since August 21st. With the average estimates for next Tuesday's report showing an average yield that is 1.6 bushels below the August USDA estimate of 169.5, trend following shorts may look to cover prior to the report. The reversal action from last Thursday is also impressive and corn could continue to ratchet higher with higher highs and higher lows. The first level of support is at 358 followed by 354 with the next upside target at 366.