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Ethanol mandate jitters slam corn futures

11/18/2013 @ 3:50pm

Corn futures fell to a 38-month low after the U.S. Environmental Protection Agency on Friday suggested cutting the amount of ethanol required to be blended into gasoline by as much as 12%. Wheat also declined, while soybeans gained.

The EPA suggested that U.S. refiners blend 12.7 billion to 13.2 billion gallons of ethanol into gasoline in 2014. The Renewable Fuels Standard, passed by Congress in 2007, currently mandates that 14.4 billion gallons be blended next year. Ethanol in the U.S. is made from corn, with one bushel of the grain making about 2.8 gallons of the biofuel.

Lower corn usage to make ethanol would mean increased U.S. stockpiles. The U.S. Department of Agriculture has already raised its outlook for inventories, forecasting supplies at the end of the current marketing year on Aug. 31 at 1.887 billion bushels, up from 824 million the prior year.

The price also declined on an unconfirmed Reuters report that China rejected a shipment of corn from the U.S. after inspectors found varieties containing unapproved genetically modified organisms.

"We saw some follow-through from the EPA report on Friday since they made that announcement five minutes before the close," said Craig Turner, a senior broker at Chicago-based Daniels Trading. "China may have found an unapporved GMO strain in some recently imported corn, and if that's the case, they're going to slow or halt U.S. corn imports, and that's not good."

Chicago Board of Trade corn futures for December delivery on the CBOT fell 10 cents, or 2.4%, to $4.12 a bushel, the lowest closing price for the front-month contract since Aug. 25, 2010. Wheat futures for December delivery fell 2 1/4 cents, or 0.4%, to $6.42 1/4 a bushel, following corn lower as the two compete as a source of livestock feed.

Prior to Friday's EPA suggestion about the ethanol mandate and Monday's Chinese report, the lowest prices were forecast to go was about $4.15 a bushel. Now, traders "are talking about $4 corn," Mr. Turner said.

Soybeans gained as demand remains strong for supplies from the U.S., the world's second-biggest exporter of the oilseeds behind Brazil, and on speculation that dry weather in South America will curb production.

Overseas buyers committed to purchase 34.1 million metric tons of soybeans from the U.S. since the start of the marketing year on Sept. 1, according to the USDA. Dry conditions are forecast through at least Sunday in parts of Argentina with temperatures rising later this week, according to forecaster DTN.

Soybean futures for January delivery rose 7 cents, or 0.6%, to $12.87 1/2 a bushel on the CBOT.

Write to Tony C. Dreibus at tony.dreibus@wsj.com
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(END) Dow Jones Newswires
November 18, 2013 15:37 ET (20:37 GMT)
DJ Corn Drops as EPA Suggests Lower Ethanol Mandate -- Update->copyright

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