- HEADLINES: Markets stay firm but drop from session highs; Ethanol data uneventful; US gasoline demand rising.
- Chicago ag markets are firm but off session highs at midday. May Chicago wheat tested multi-week highs early but failed to find follow though above $7.30, the contract was also unable to break through its 50-day moving average. The US dollar finding support above 102.5 is also noted. Money flow and chart patterns will be driving price discovery into the release of NASS stocks & seedings data. However, there is still no signal that markets are oversupplied. Paris milling wheat is up €4.00/mt. EU corn and wheat markets are again inverted. EU rapeseed has rallied another €9.00/mt and is now €61/mt (15%) above its low scored just last week. US exporters sold another 204,000 mt of corn to China this morning, bringing announced sales to China above 3.0 million mt since mid-March.
- The US’s energy balance sheet is beginning to tighten seasonally. Crude oil stocks less reserves on March 24 totalled 474 million barrels, down 7 million week on week. Motor gasoline stocks totalled 227 million barrels, down 3 million from the prior week, down 5% from last year and the lowest for late March since 2014.
- Most important is that gasoline use has seemingly recovered and has expanded in each of the last two weeks. Gasoline disappearance in the week ending March 24 was 9.15 million barrels/day, a 5-week high and up a sizeable 8% year on year. Note that gasoline use rises seasonally throughout the April-Sep period, and the (relative) cooling of retail prices since last summer should allow for additional growth moving forward.
- US ethanol production last week was an uneventful 295 million gallons, up just 2 million on the previous week and slightly below the pace needed to hit USDA’s target. But a rapid drawdown in stocks lies ahead, which in turn requires at least a modest boost in grind rates April onward. The spot ethanol swap market today is unchanged at $2.24. The forward market has rallied to $2.29, basis July, which keeps profitable margins intact. Note that July ethanol two weeks ago was trading at $2.10-2.12/gallon.
- A mixed closed is anticipated, with overhead resistance in corn/wheat established near today’s highs. Next resistance in May soy lies at $14.90.
- The midday GFS weather forecast is similar to the overnight run in projecting massive snow totals across the Northern Plains & Upper Midwest next week and additional heavy rainfall in the eastern Midwest this weekend and again next Tues-Thurs. It remains that temperatures will warm at least briefly across the Central Plains and Midwest into April 6, and on balance soil temperatures in the heart of the Corn Belt will be closer to normal by mid-month. Yet, our primary concern of snow/cold in the north and exceptional drought across the southern Plains don’t look to be eased in the next two weeks.
- The exits of Cargill and Viterra from Russia suggest the government there aims to more strictly control food markets, and overall Russia appears to have become a less reliable market for at least spring/early summer delivery. Near-term corn/soy direction hinges upon NASS data on Friday.