Daniels Trading Senior Broker Craig Turner was quoted in the Dow Jones Newswire article titled “Ethanol mandate jitters slam corn futures.” This news story reports on how potential EPA reductions to the Ethanol Mandate are impacting corn prices.
Corn futures fell to a 38-month low after the U.S. Environmental Protection Agency on Friday suggested cutting the amount of ethanol required to be blended into gasoline by as much as 12%. Wheat also declined, while soybeans gained.
The EPA suggested that U.S. refiners blend 12.7 billion to 13.2 billion gallons of ethanol into gasoline in 2014. The Renewable Fuels Standard, passed by Congress in 2007, currently mandates that 14.4 billion gallons be blended next year. Ethanol in the U.S. is made from corn, with one bushel of the grain making about 2.8 gallons of the biofuel.
Lower corn usage to make ethanol would mean increased U.S. stockpiles. The U.S. Department of Agriculture has already raised its outlook for inventories, forecasting supplies at the end of the current marketing year on Aug. 31 at 1.887 billion bushels, up from 824 million the prior year.
The price also declined on an unconfirmed Reuters report that China rejected a shipment of corn from the U.S. after inspectors found varieties containing unapproved genetically modified organisms.
“We saw some follow-through from the EPA report on Friday since they made that announcement five minutes before the close,” said Craig Turner, a senior broker at Chicago-based Daniels Trading. “China may have found an unapproved GMO strain in some recently imported corn, and if that’s the case, they’re going to slow or halt U.S. corn imports, and that’s not good.”
Chicago Board of Trade corn futures for December delivery on the CBOT fell 10 cents, or 2.4%, to $4.12 a bushel, the lowest closing price for the front-month contract since Aug. 25, 2010. Wheat futures for December delivery fell 2 1/4 cents, or 0.4%, to $6.42 1/4 a bushel, following corn lower as the two compete as a source of livestock feed.
Prior to Friday’s EPA suggestion about the ethanol mandate and Monday’s Chinese report, the lowest prices were forecast to go was about $4.15 a bushel. Now, traders “are talking about $4 corn,” Mr. Turner said.
Soybeans gained as demand remains strong for supplies from the U.S., the world’s second-biggest exporter of the oilseeds behind Brazil, and on speculation that dry weather in South America will curb production.
Overseas buyers committed to purchase 34.1 million metric tons of soybeans from the U.S. since the start of the marketing year on Sept. 1, according to the USDA. Dry conditions are forecast through at least Sunday in parts of Argentina with temperatures rising later this week, according to forecaster DTN.
Receive an Unlimited Free Subscription to Turner's Take Newsletter!
Turner’s Take was created to give traders and investors a window into the elusive world of LaSalle and Wall Street. My experiences at the NYSE, Goldman Sachs, NYU Stern and Daniels Trading have produced invaluable knowledge and contacts in our most vital capital markets. This wealth of experience and insight has proven to be a critical educational and investment vehicle for my clients and subscribers.
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 third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.
