- The week has started with us digesting Friday’s late news from the US EPA (Environmental Protection Agency) that the new bio-fuel mandate proposal is to change. The change encompasses a reduced mandate for al bio-fuels to 15 to 15.2 billion gallons, around 16% less than the 2007 US energy legislation agreed volume of 18.15 billion gallons. Probably the biggest single item was the reduction from the agreed 3.75 billion gallon advanced bio-fuel blend in 2014 to a much reduced 2.0-2.5 billion gallon blend volume. Whilst not formally agreed, it appears that spring time will mark enactment, and the US bio-fuel industry has reached maturity.
- Outside of the advanced bio-fuel mandated range, the balance which is traditional corn based ethanol, will range from 12.7 to 13.2 billion gallons, compares with previous targets of 14.4 billion gallons – an 8.3 to 11.8% reduction! The outlook for corn prices in 2014 and planting prospects will become extremely interesting to say the least.
- In late trading corn prices declined over 2% to new lows (basis front month contracts) after a gap lower opening. The technical picture for corn looks far from bullish right now. Added to Friday’s news, reports from Reuters that China has rejected a cargo of corn because of unapproved GMO contamination, has done little to bolster prices. Further suggestions that the seemingly incessant demand for both corn and soybeans from China may have peaked has also spooked the market.
- S American weather conditions continue to be seen as broadly favourable, although there is a long way to go before crops can be considered as safe, and this is also weighing on price sentiment.
- On a slightly contrary tone, results from the latest Indian wheat tender would appear to indicate trade willingness to pay over and above the $260.00/mt floor price although final results are still awaited.
- Finally, the UK’s London wheat futures market has seen tenders submitted against 1,229 contracts against the November contract. This is the highest number seen in recent years, most in the East and South West and the only conclusion which can be logically drawn is that the futures market represent the best market. Friday 22 November marks the end of the Nov ’13 contract and its tender period.