Written by Chris Robinson
Corn: December corn settled down 4 ½ cents at $4.22. CZ14 settled down 6 ¾ cents at $4.59 ¾, which is a new 3-year low and life of contract low settlement. For the week, CZ lost 4 ¾ cents, while CZ14 lost 8 ¾ cents. Corn opened higher and challenged the $4.30 level once again, but turned over and headed south in a dull grind through quiet trade. The exports were strong at 1.2 MT. This was above the average trade guess and was considered supportive of prices. At 10:30 AM, Informa released its private 2014 estimates. They pegged corn acres at 91.546 million acres down from its previous 91.7 million acre estimate. At 1PM the EPA released its new mandated levels. Their 2014 goal is 15.2 billion gallons of bio-fuels. This is a 16% DECREASE in the 2007 renewable fuels law. At first glance, this translates into the following changes: A CUT in the ethanol mandate to 12.7 billion gallons from the previous 14.4 billion gallon mandate. This initially pencils out to 414-587 million FEWER bushels of corn demand. It’s important to note that there are 60 days to allow public comment prior to this becoming the new law of the land. It is interesting to note that the market did not tank in the last 15 minutes of trade in response to this announcement. Next week’s trade should give us a better feel as to the real impact of this information. Hedgers: December Options expire a week from today. Adjust your protection accordingly.
Wheat: December Chicago Wheat settled down ¼ cent at $6.44 ½ which is a new 2-month low settlement. KC December settled down 4 ¾ cents at $6.98 ¼, also a fresh 2-month low and low settlement. For the week Chicago lost 5 ¼ cents, while KC lost 4 ¾ cents. Exports were not great, coming in at 287,800 MT. The trade had expected 350K to 550K, so these numbers were disappointing. The rumors of more Chinese and Russian business unfortunately seemed to be just that-rumors. Informa pegged 2014 all wheat planted acres at 58.105 million acres, up from its previous estimate of 57.7 million acres. Next week we will be getting more updates from the crop condition in Australia. With US wheat sitting on fresh 2-month lows, the bulls will be searching the skies for a gust of wind to fill their sails. The 4 month highs we spiked to just 20 trading days ago are looking better and better if you priced puts there or sold cash wheat. Hedgers: December options expire next Friday at 1:15PM. Adjust your protection accordingly.
Soybeans: January soybeans settled down 33 cents at $12.80 ½. SX14 settled down 23 ½ at $11.53 ½. For the week, SF lost 15 ½ cents, while SX14 lost just 7 ½ cents. Exports were on the lower end of expectations at 848,500 MT. The trade had been looking for 900 to 1.2 MT. Today’s sell-off looked suspiciously like fund managers lightening the load of longs after enjoying a 50 cent rally last week in the wake of the USDA, not to mention, more than a 74 cent rally between last Tuesday’s low at 12.47 and yesterday (Thursday the 14th) high tick at $13.21 ½. Everyone has to take profits sooner or later, and today’s move below the 13.00 level in SF seemed to set off protective sell stops. Today’s low retraced almost 62% of the 74 cent rally. This is a key technical support level. Support below comes at $12.75, $12.61 and then last Tuesday’s 3-month low at $12.47. Hedgers: Hopefully you took our advice and sold another 10% of 2013 soybeans on Wednesday.
Obviously the biggest news today was the Ethanol Mandate changes. It’s hard to see how this is bullish for corn prices as it projects an additional 400 to 600 million bushels of corn carry-out. It’s important to note that we will have 60 days before this change becomes law. It is interesting to note that even though the market was open while the EPA made this announcement, we didn’t have a complete swan-dive lower. Granted we did make a new 3-year low and contract low settlement in CZ14, but CZ13 held the $4.20 level for a solid 15 minutes of trade and into the close. Next week’s trade should be interesting.
Have a great and safe weekend.
CER