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Home / Futures Blog / Turner’s Take | Ethanol and Corn

Turner’s Take | Ethanol and Corn

March 27, 2020 by Craig Turner

Macro Markets

The US House of Representatives is taking up the new stimulus bill today.  This is a $2.2 trillion spending bill aimed at supporting individuals and businesses due to the economic impact of the coronavirus.  Jobless claims yesterday were over 3 million.  The previous record was under 1mm, meaning yesterday’s report was about 4 times higher than any other jobless claims report going back to 1967.

We think the US is now entering a wide ranging consolidation period.  These periods tend to be bear markets.  It is going to take a couple of months to get coronavirus under control and things will not go back exactly to how they were before the crisis. It takes time to rebuild the economy and recover.  The second quarter will most likely have negative GDP growth and high unemployment.  The hope is the 3rd quarter is zero growth and employment stabilizes and the 4th quarter is a return to economic growth and improvements in employment.  It is still early but that is what a lot of economic analysts are thinking at the moment.

If you are not a subscriber to Turner’s Take Newsletter then text the message TURNER to number 33-777.  You will receive the newsletter and podcast notifications for free!

Ethanol & Corn

Farm Policy (Univ of IL) is estimating ethanol production will be down about 750mm gallons for March, April, and May.  That is about 250mm bushel of corn lost from decreases in ethanol demand. There will probably be more demand lost in June/July/Aug to round out the marketing year.  Right now we could be looking at 350mm to 400mm bushels of lost demand for 2019-2020 corn.  The big concern is those bushels go right back into the ending stocks on the balance sheet.

April Ethanol last traded $0.99/gallon.  April RBOB gasoline is $0.54/gallon.  For ethanol to make economic sense for blending with gasoline, RBOB needs to be trading higher than Ethanol.  This can happen in only two ways.  The first is crude oil and rbob gasoline recover.  This means Crude in the $40s again and RBOB well over $1.  The second is corn goes lower.  I’ve seen estimates that ethanol can work at current energy prices if cash corn is around $2.70.  If the national average corn basis gets to 30 under (currently about 20 under) that means $3 front month corn could translate to $2.70 cash.

So what is going to happen?  Do energy prices go up?  Do corn prices come down?  Over time I think it is a mix of both. I hope the bigger driver will be higher energy prices and less corn acres for 2020-2021.  Export demand increases will help and this could be a good opportunity for China to come in and buy US corn on the cheap.

If you are not a subscriber to Turner’s Take Newsletter then text the message TURNER to number 33-777.  You will receive the newsletter and podcast notifications for free!

This Month

I will be working from home. You can call my office number 312-706-7610 and it will roll to my cell phone. My cell is 312-651-4621 and you can reach me there too.  Anything I can do in Chicago I can do from my home office, so feel free to call, text, or email anytime.  Stay safe and lets hope for better news and developments soon.

What I’m Doing at Home with the Family 

We have now been at home for two weeks.  It definitely seems longer.  My wife had a “happy hour” (more like three hours) last night with her friends on Zoom, an internet web conference product.  They all seemed to have a great time.  I guess if you can’t meet at a bar, restaurant, or someone’s home, the next best thing is a bottle of wine and web conferencing.

While my wife was blowing off some steam with the ladies, I was on a conference call too.  I am a director for our local youth lacrosse program (a spring sport) and we had a conference call yesterday with our Park District about the status of spring sports.  After the meeting my personal opinion is youth sports don’t start up again until late spring/early summer…at best.  In the suburbs I think you can get very localized youth rec leagues up and running later this spring but the competitive travel teams are probably sidelined for a longer period of time.

Tiger King (TV-MA) – The latest internet sensation is Tiger King on Netflix.  Wow.  Once you think they get to 10 on the bonkers scale they bury the needle and take it to a whole other level.  It is not for kids and not for everyone, but if you are up for something crazier than what is going on in the world right now, check out Tiger King.

If you are not a subscriber to Turner’s Take Newsletter then text the message TURNER to number 33-777.  You will receive the newsletter and podcast notifications for free!

About Turner’s Take Podcast and Newsletter

If you like this content then please sign up for a free subscription of Turner’s Take Newsletter & Podcast.

Craig Turner – Commodity Futures Broker
Turner’s Take Ag Marketing: https://www.turnerstakeag.com
Twitter: @Turners_Take

Contact Craig Turner

Turner’s Take Newsletter & Podcast

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Turner’s Take Newsletter & Podcast - Turner’s Take is a complimentary weekly market commentary newsletter that covers the Grain, Livestock and Energy futures spread markets using fundamental, technical and seasonal analysis.

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THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

Filed Under: Turner's Take

About Craig Turner

Craig Turner is a Senior Broker at Daniels Trading, author of Turner’s Take newsletter, and a Contributing Editor for Grain Analyst. Craig is often quoted in the Wall Street Journal, Reuters, Dow Jones Newswire, Corn & Soybean Digest, and also makes appearances on SiriusXM – Rural Radio Channel 80 providing commentary for the Grain and Livestock markets. Craig has also been featured in FutureSource’s Fast Break series, Futures Magazine Online, and INO.com. Mr. Turner has a Bachelors from the Rensselaer Polytechnic Institute (RPI) where he graduated with honors and has worked at the NYSE and Goldman Sachs. While at Goldman, Craig earned his MBA in the NYU Stern executive program. Learn more about Craig Turner.

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Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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