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Ethanol, export worries keep a lid on corn futures

12/13/2013 @ 11:02am

Corn futures fell for a second straight session after a group of U.S. senators on Thursday proposed a bill that would eliminate a mandate requiring a certain amount of ethanol, which is made from the grain, be blended into gasoline. Soybeans and wheat also declined.

Sens. Dianne Feinstein (D., Calif.), Tom Coburn (R., Okla.) and eight co-sponsors introduced the bill, further spurring concerns that demand for corn by ethanol producers would decline after the Environmental Protection Agency last month proposed lowering the mandate. The goal behind the bill would be to allow ethanol to compete on price rather than a government-imposed requirement, Sen. Feinstein said. Renewable Fuels Association President Bob Dinneen called the bill "monumentally stupid."

Investors are also concerned that China may reject more shipments from the U.S. after already denying entry to 180,000 metric tons of the grain that contained an unapproved genetic trait. As fundamentals turned negative, speculative investors are selling contracts and exiting their long positions, or bets that prices would rise, analysts said.

"There isn't a fundamental issue out there that could give us additional upside potential," said Shawn McCambridge, the senior grains analyst at brokerage Jefferies Bache Commodities LLC in Chicago. "We had some decent gains going into midweek but we couldn't get any momentum and a lot of nervous longs saw that buying wasn't going to develop. All of that combines to kind of keep the longs a bit concerned."

Corn futures for December delivery dropped 3 3/4 cents, or 0.9%, to $4.24 1/2 a bushel on the Chicago Board of Trade. March futures fell 4 3/4 cents, or 1.1%, to $4.29 1/4 a bushel.

Soybean futures for January delivery fell 9 1/4 cents, or 0.7%, to $13.14 1/2 a bushel on the CBOT. The price declined after sales of meal and oil made from soybeans have dropped recently, which may weight on demand from domestic processors.

Wheat dropped on signs of slack demand for inventories from the U.S., the world's biggest exporter of the grain. Egypt this week bought wheat from France and Romania, shunning U.S. supplies.

Wheat futures for December delivery fell 2 1/4 cents, or 0.4%,t o $6.20 1/4 a bushel in Chicago. March futures dropped 6 3/4 cents, or 1.1%, to $6.27 1/4 a bushel.

The price also declined after the government in a Tuesday report unexpectedly raised its projection for domestic stockpiles by 1.8% to 575 million bushels. The agency also increased its projection for global output and stockpiles as Canada, expected to produce a record crop, and Australia, where the harvest is forecast at the third-highest ever, increase production.

"Wheat is looking for some price level that will bring demand back to the market, at least demand for U.S. supplies," Mr. McCambridge said. "And over last week we saw the USDA bump up its production number, confirming what Canada and Australia said about their production. There's not a good fundamental support base for wheat."

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