Ethanol news leads grain market bounce

0
173
corn in fall

Last week I held out the slim hope that there is a trend for corn futures prices to improve during Thanksgiving week. Well, so much for that.

On Friday corn futures dropped six and three quarters cents to close at 3.59 1/4. That was 4 cents lower for the week. It felt a little better that we jumped almost 6 cents Monday to close at 3.59 1/4. The electronic pit giveth and the electronic pit taketh away, I guess.

RFS mandate

The good news is that Monday’s market reflected real news, not just a bounce. EPA released its Renewable Fuels Standard mandate for 2016, and it was a nice gain over 2015. The mandate for 2014 was 16.28 billion gallons. In 2015, we had a slight increase to 16.93. For 2016, we have 18.10, a nice gain.

This is reflected in reality, as there has been a trend to higher ethanol production. We have actually been producing more than the mandate, using 17.4 billion gallons in 2015. Last week we had the biggest week for production ever, up 33,000 barrels a day to 108,000 barrels. (Buried in the excitement of a projected jump in production is the fact that back in 2007 Congress set a target for ethanol use of 22.25 billion gallons.)

So, the good news is that production of ethanol is up. The bad news is, the production of ethanol is up and all I got was this lousy T-shirt and a lousy price to go with it. One would hope that news like this would buoy the market instead of just helping it recover from a one-day loss.

Oil prices

The actual usage of ethanol is directly related to gasoline consumption. We are now at the point of almost all gas having 10 percent ethanol. Gasoline consumption is up, partly because of the low price. The low price of oil is a product of production and supply. OPEC has increased their production, trying to make up in income what they are losing in price.

In the short run, this is good news. I bought gas in Warren, Ohio, yesterday for $1.599 after a 20-cent Kmart coupon. The bad news is that we are crushing what was the booming shale oil business in this country because oil close to $40 a barrel does not pay the costs for shale production. We are getting back to the policy of pumping the sand pit dry first.

Adding to the bad news column is the speculation about Argentine export tax cuts, which would make their crops more competitive. Argentine’s president-elect is staying with his election plan to cut the taxes once he gets into office.

Prices

Looking at prices, we are up two and a half cents on the December corn futures this Tuesday morning, Dec. 1, at 3.67 1/2. The January soybeans are up a nickel at 8.86. Even Chicago wheat futures are up, with the December contract at 4.61, up one cent. The wheat is following the lead of the other commodities, even though the crop conditions have improved a little. For the U.S., 55 percent is now rated good or excellent, up two points for the week, but three percent off the rating of this time last year. Ohio is much ahead of that, with 71 percent rated good or excellent.

Competitive news from the wheat wars is conflicting. The Ukraine crop is said to be down, but the Russians are looking at a big crop. They expect to export 30 million metric tons of a 103.7 mmt crop.

On the other hand, Australia is cutting the projection there, and blaming it on expect dry weather from the El Nino. Currently they are looking for 23.98 mmt instead of last year’s 25.28 mmt.

STAY INFORMED. SIGN UP!

Up-to-date agriculture news in your inbox!

NO COMMENTS

LEAVE A REPLY

We are glad you have chosen to leave a comment. Please keep in mind that comments are moderated according to our comment policy.

Receive emails as this discussion progresses.