10-13-2010 07:10 AM - edited 10-13-2010 02:00 PM
At the close:
The Dec corn futures settled 9 3/4 cents lower at $5.69 1/4. The Nov. soybean contract settled 2 cents lower at $11.76 1/2. The Dec. wheat futures ended 7 1/4 cents lower at $7.02 3/4. The Dec. soymeal futures contract settled $4.10 lower at $329.00 per short ton. The Dec. soyoil futures contract closed 63 points higher at $47.58.
In the outside markets, the NYMEX crude oil is $1.54 per barrel higher, the dollar is higher, and the Dow Jones Industrials are up 112 points.
The EPA has officially announced Wednesday that it will allow 15% of ethanol-blended gasoline in motor vehicles 2007 and newer. A decision has been deferred for vehicles 2001-2006. More testing is needed. A research of those years will be completed this month. The waiver for smaller vehicles such as motorcycles has been denied. EPA officials say this is not a mandate, it's a permission for blending companies to use ethanol at the 15% level.
During the press conference, the EPA folks say that in 2011 65 million cars will be eligible to burn E15 gasoline. That equates to one-third of gasoline consumption in the U.S.
EPA is also announncing a proposal for new pump labels, a variety of labels will be presented for public comment. In fact, public comment will be eligible for all news released today by the EPA, before this new blend rate is put into place.
Meanwhile, one floor trader reacts with these words: "But, without subsidy to fuel retailers I expect it to be a slow input into the market as the cost of delineating fuel types at the pump is prohibitive. So, this is a moot point with ethanol trading above RBOB as it is now. So, this announcement will have little if any immediate corn market impact. But, today's announcement keeps an energy bid under the market.
He adds, "The price of grain will now more than ever be priced at the margins of the fuel market…leaving more volatility for the meat and grocery producer.
For decades farm policy allowed for over production where grain prices often traded under cost of production…farm subsidy for the most part made up the difference to the producer….that meant poultry, cattle and hog producers and food suppliers could grow businesses on cheap subsidized grains….that era is gone…cheap over supplied grain markets will be now quickly dumped into energy stream to clear stocks… and food producers will now be more at risk to weather spikes and energy spikes….this isn’t a critique just an observation," he says.
Yet another trader reaction: "Ethanol consumption has the potential to out strip feed consumption by 2015…..and consume over half the current corn crop… corn will need to plant 90+ million acres a year… leaving SA to plant more soy while we plant less and crush less soy… ramifications are higher feed cost less meat consumption and higher oil share…over capacity in cattle feed lots… lose more hog exports… and perhaps turn to net importer of edible oils…
We do this instead of raising CAFÉ standards for cars another 5 mpg. The ultimate function of markets is too discipline governments."
EPA Press Conference at 12:30pm CST. Read more on today's EPA expected announcement at http://bit.ly/aB7WwG.
The Dec corn futures are 5 1/2 cents lower at $5.73 1/2. The Nov. soybean contract is 1 3/4 cents higher at $11.80 1/4. The Dec. wheat futures are 2 3/4 cents lower at $7.07 1/2. The Dec. soymeal futures contract is $2.30 lower at $330.70 per short ton. The Dec. soyoil futures contract is $0.45 higher at $47.40.
In the outside markets, the NYMEX crude oil is $1.52 per barrel higher, the dollar is higher, and the Dow Jones Industrials are up 110 points.
One analyst says, "Well, if the EPA announces the jump to a 15% ethanol blend, corn rallies. But, funds fade the rally as its largely old news. An EPA announcement of a failure to increase the blend and we drop in prices. Either way, the response is temporary. Upon eventual approval to 15% we begin talk of a move to 20% which is the long term Obama goal by 2014. Consumers won't see corn prices push gas higher, as ethanol producers are smartly bought at cheaper values on corn. Only oil, near term drives the gas. Remember, the bankruptcies of 2009 got all the bad ethanol blenders out of the business putting it into the smart hedge buyers. Tax credits for ethanol will stay for at least one more year. Obama is a visionary as we saw on his health care program, his ethanol or energy program is a mandate to his vision of an oiless country. Today's grains saw profit taking off the follow thru high rally from Tuesday as traders remain fat with profits and continue to pull profits off rallies."
At the open:
The Dec corn futures are 5 1/2 cents higher at $5.84. The Nov. soybean contract opened 9 cents higher at $11.87 3/4. The Dec. wheat futures opened 6 cents higher at $7.16 1/2. The Dec. soymeal futures contract opened $2.00 higher at $334.90 per short ton. The Dec. soyoil futures contract opened $0.38 higher at $47.33.
In the outside markets, the NYMEX crude oil is $1.00 per barrel higher, the dollar is lower, and the Dow Jones Industrials are up 79 points.
USDA just announced that China bought 297,500 metric tons of U.S. soybeans for 2010-11. Also, Iraq bought 100,000 metric tons of U.S. wheat f or 2010-11 delivery.
Are you wondering what to watch for in order to get an early sign the markets have topped out? One analyst wrote in a daily market note to customers, "Watch for grain spreads, ethanol production, and hog price spreads. These will show me when price rationing may have started."
--Overnight, the March '11 soybean contract hit $12.10 per bushel. WoW!
--South Korea's NOFI bought corn amounts of 13,000, 40,000, and 53,000 metric tons.
--In China, September soybean imports totaled 4.64 million metric tons, up 69% vs. a year ago. For October, China is expected to import 4.0 million metric tons. For the first 9 months, China's soybean imports are up 24% vs. a year ago.
Early calls: Corn up 3-5 cents, soybeans up 10-12 cents, and wheat up 3-5 cents.
Overnight grain=Trading higher.
Crude oil=Trading $1.26 per barrel lower.
Wall Street=Seen trading higher with more Fed quantitive easing. Also, third quarter earnings by JP Morgan and Intel.
10-13-2010 12:26 PM
Thank you EPA! If you can't put livestock out with cap and trade why not just increase the cost of production so much we can't stay in business? It is a conspiracy and I am not sure anybody will convince me differently. Like I said before we are screwed! JR
10-13-2010 12:34 PM
Regardless of whether or not Obama is a visionary, he isn't the one that gets to pass the blenders credit. Congress has to first pass the bill before it can even get to Obama's desk. So far, it's going as I thought it would. The E15 WAIVER will get passed, but the blenders credit and import tariff will fail. It wouldn't shock me at all to see the cattle industry use their dollar checkoff a little differently in the next year or so.
10-13-2010 01:08 PM
I was just wondering on how much capacity Brazil has to export etoh to the US if the import tariff isn't renewed.
A billion gallons of etoh puts about 350 mb back on the balance sheet. Dunno, can't really find anything.
10-13-2010 02:13 PM
At one time, it would have been a significant amount. Then, sugar prices went crazy. When this happens, Brazil makes less ethanol and exports more sugar. Right now, I don't know how much could be filled. According to sources in Brazil, they believe they could fill a huge gap if the tariff was removed. Here in Nebraska, we really don't even have E85 pumps even though a lot of people own flex fuel vehicles. In fact, the closest E85 pump to me is almost 100 miles away. If we can't get E85 pumps, what are the odds that we see fuel stations add a lot of E15 pumps? Even with the blenders credit, I can definitely see some blenders reluctant to blend higher than 10% levels because the gov't wouldn't/didn't address the liability for engine or component failures and who's liable. It's almost as if the industry was handed down a token that in the end really won't do anything. I've read where some insiders believe it will actually make ethanol useage go down. Their reasoning stems from the massive labels that E15 pumps will be required to have. They are afraid once people read about the vehicles that can't use E15 that they'll elect to use no ethanol blended fuel at all wheras they've been frequent E10 customers for years.
10-13-2010 08:44 PM
of many, many, many steps. It will be a few years before much market impacting acceptance. If trendline are actualling increasing, we are going to need more uses for corn. E-15 could be one of those additional uses.
10-13-2010 10:51 PM
The approval was simply a finding that a certain class of cars could burn 15% w/ no damage. No mandate. There will be no change. The next test ends in November for even older cars to see if they are damaged by that level of ethanol. After that the politics begin. There will be no islands w 15% and 10% pumps. I seriously doubt any 15% pumps appear unless it's for workers at the ethanol plant.
As for Brazil, the last I saw several months ago is that I believe they were actually importing ethanol from the US because of high sugar prices.