US biofuel rumours send grains prices on a dizzy ride

01.03.2017

Corn and soybean futures went on a roller coaster ride, spiking nearly 6% at one point, on ideas that the White House might allow an increase in the blending of ethanol into gasoline, which would support demand for the corn-based biofuel.

The Renewable Fuel Association (RFA) offered a suggested resolution to the long-standing question of who should hold responsibility for ensuring the inclusion of ethanol in gasoline, and vegetable-oil based biodiesel into diesel.

The responsibility currently falls on refiners, although they can outsource this obligation by buying Renewable Identification Numbers (Rins) from blenders who include biofuels.

White House denies executive order

The RFA said on Thursday that it would accept these measures if the White House also increased the amount of ethanol that could be blended into gasoline, with the cap raised from 10% to 15% in summer months.

The news sent corn prices soaring, with media sources carrying reports from unnamed sources supposedly close to the issue that a presidential memorandum was on its way.

But White House spokeswoman Kelly Love later denied these reports, saying "there is no ethanol executive order in the works".

Rollercoaster markets

Corn futures soared on the news, driven by ideas that higher ethanol blending will force facilities to up their output, increasing corn demand.

"Speculation in changes to the RFS has the market higher," said CHS. "A change from a 10% to 15% year-round blend is the focus."

Nearly half of US corn goes into ethanol, the majority of which is consumed in

But prices trimmed gains as the level of uncertainty over White House policy sobered up the market, particularly as a number of biofuel groups opposed the deal.

Ethanol futures rose to highs of $1.585 a gallon, but finished up 1.4%, at $1.548 a gallon.

May corn futures rose nearly 6%, to $3/86 ј a bushel, but trimmed gains to finish up 1.3%, $3.73 a bushel, holding above the 200-day moving average.

Soyoil support

The speculation was also supportive for soyoil, which is processed into biodiesel.

"What a day for oilseeds!" said CRM AgriCommodities. "Bullish announcement regardign the US biofuels programs propelled Chicago soybean oil nearly 6% higher at one point during the session".

May soybean futures spiked to highs of 34.74 cents a pound, but trimmed gains a touch, to finish up 4.7%, at 34.15 cents a pound.

May soybean futures settled up $1.5%, at $10.37 ј a bushel, after reaching highs of $10.56 ј a bushel.

Big Egyptian purchase

Wheat prices were supported by the strength in corn and soybeans, as well as a touch of bargain buying after the May contract held above 100-day moving average.

And late in the Chicago session came another whopping wheat purchase by Egypt.

Gasc, the state grain buyer for the world's top wheat buyer, bought 535,000 tonnes of wheat.

And for the first time this season, French wheat managed to win out in a Gasc tender, with two 60,000 tonne cargoes sold at $199.00 and $197.00 a tonne respectively.

Other shipments came from Russia, Romania and Ukraine.

The fact that French wheat is competitive against Black Sea supplies underlines just how fast Russian wheat prices have risen.

May Chicago wheat futures settled up 1.3%, at $4.44 ј a bushel.

Cocoa plumbs new lows

Cocoa futures plummeted to fresh lows, under pressure from the heft global production surplus.

"Ivory Coast anticipates a record of near record production of between 1.9 and 2.0m tonnes," said Jack Scoville, at Price Futures group.

"Ghana is now expecting production near 800,000 tons."

Mr Scoville noted "ideas are that there is plenty of cocoa available to the world market, but the demand has fallen and needs to be rebuilt".

May New York cocoa settled down 3.7%, at $1,909 a tonne, the lowest close for the contract so far.

Sugar edges higher

Raw sugar futures edged up ahead of the expiry of the March contract.

The March contract settled up 0.1%, at 19.31 cents a pound.

May raw sugar futures settled up 0.4%, at 19.23 cents a pound.


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