Grain prices close lower

10/13/2010 @ 9:48am

CHICAGO, Illinois ( as the Environmental Protection Agency announced a waiver to increase the ethanol blend into U.S. gasoline, the CME Group grain markets pulled back to close lower Wednesday.

The Dec corn futures settled 9 3/4 cents lower at $5.69 1/4. The Nov. soybean contract settled 2 cents lower at $11.76 1/2. The Dec. wheat futures ended 7 1/4 cents lower at $7.02 3/4.  The Dec. soymeal futures contract settled $4.10 lower at $329.00 per short ton. The Dec. soyoil futures contract closed 63 points higher at $47.58.

In the outside markets, the NYMEX crude oil is $1.54 per barrel higher, the dollar is higher, and the Dow Jones Industrials are up 112 points.

The Environmental Protection Agency announced Wednesday a waiver for U.S. gasoline to be blended with 15% ethanol vs. the current 10% in motor vehicles 2007 and newer.

Meanwhile, a decision to increase the ethanol blend rate for vehicles 2001-2006 has been deferred, Gina McCarthy, EPA Assistant Administrator told reporters during a press conference.

“More testing is needed. A research of those years will be completed this month. The waiver for smaller vehicles such as motorcycles has been denied,” McCarthy says.

EPA officials say this is not a mandate, it's a permission for blending companies to use ethanol at the 15% level.

During the press conference, McCarthy noted that in 2011 65 million cars will be eligible to burn E15 gasoline. “That equates to one-third of gasoline consumption in the U.S,” McCarthy says.

 Tim Hannagan, senior analyst, says if the EPA announces the jump to a 15% ethanol blend, corn rallies.

"But, funds fade the rally as it's largely old news. An EPA announcement of a failure to increase the blend will drop prices. Either way, the response is temporary. Upon eventual approval to 15% we begin talk of a move to 20% which is the long term Obama goal by 2014."

Hannagan adds, "Consumers won't see corn prices push gas higher, as ethanol producers are smartly bought at cheaper values on corn. Only oil, near term drives the gas. Remember, the bankruptcies of 2009 got all the bad ethanol blenders out of the business putting it into the smart hedge buyers. Tax credits for ethanol will stay for at least one more year. Obama is a visionary as we saw on his health care program, his ethanol or energy program is a mandate to his vision of an oiless country. Today's grains saw profit taking off the follow thru high rally from Tuesday as traders remain fat with profits and continue to pull profits off rallies."