The Good: There was little in the way of good news in the commodity markets today, but ethanol stocks in the U.S. dropped by 300,000 barrels to 21 million barrels last week. After ballooning to 27.7 million barrels in the first week of April, ethanol stocks are now at the five year average. Ethanol production increase on the week to 873,000 barrels. This is still below the average production of 1.02 million barrels, but production will likely continue to rebound as gasoline consumption continues to rise. Corn consumption for ethanol will return close to pre COVID-19 levels in July. That is good news for the corn and grain markets in general.
The Bad: Markets dropped today because COVID-19 cases in the U.S. hit a new daily record with over 36,000 cases reported over the past 24 hours. This puts the U.S. numbers back above Brazil for the largest number of daily cases. The graph below (from the John Hopkins COVID project) shows that the five day average number of cases in the U.S. now exceeds Brazil. Most of the surge of cases are in the southern and western U.S. which likely means that the numbers will continue to increase for at least a few more weeks. The reason is that these states have mostly reopened and are not likely to reinstate stay at home orders. This is not good news for the economy in the U.S. as it appears that the COVID-19 outbreak will remain high into the fall.
The Ugly: The EU appears to be considering retaliatory tariffs against the US$3.1 billion dollars in tariffs proposed by Washington. The EU is waiting for a favourable ruling from the WTO in order to institute the tariffs, but the Europeans may publish their targets in advance of the ruling. This marks continued escalation in the U.S. trade wars with various countries, which will likely slow the recover from the current recession. For those history buffs, one of the triggers of the Great Depression was the imposition of the Smoot-Hawley tariffs in 1930.