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Profit Watch Commentary – Dec. 13, 2013

TGIF.  The rally we had going to start the week got side-tracked.  March corn futures faded about 14 cents from yesterday’s high.  From Monday’s high to today’s low, March beans dropped 36 cents.  Old crop soybeans still managed small net gains on the week.  All corn and wheat contracts lost ground on the week.

Soybeans managed a respectable comeback into the closing bell today led by meal.  The spot basis levels for outbound meal have been rising rather significantly in recent weeks.  Slow farmer movement of beans into processors along with an anticipated uptick in demand were the bullish features in the soya complex this week.  Potential trouble ahead for DDG exports has the soybean trade thinking more meal may have to get into that pipeline.

Of course, the trouble we’re referring to is China having issues with a particular unapproved GMO trait showing up in boats at their ports. The issue with boatloads of corn is old news.  A rumor that 50 containers of U.S. origin DDGs with the GMO trait have been rejected is the new wrinkle.  Could be that China is simply playing games and they’ll take the “tainted corn” after all.  Nearly every other country in the world does NOT have a problem with this particular trait.  But, the implications of less corn & DDG exports has the trade nervous.  China has bought approximately 150 million bushels of U.S. corn so far this crop year.  Over 100 million bushels of this amount has not yet shipped!

On top of the trouble with China, we’ve got the “stupid” proposal from a group of U.S. Senators called the “Corn Ethanol Mandate Elimination Act”.  Bob Dinneen, President and CEO of the Renewable Fuels Association (RFA), was recently quoted saying, “This is monumentally stupid. This legislation ought to be entitled ‘The Oil Monopoly Protection Act of 2013.’ This bill would deprive Americans of cost-saving, renewable fuel choice. It would set this country back in its quest to gain energy independence and further damage the environment by increasing the need for fracking, tar sands, and off-shore drilling.”

According to a recent report by the World Energy Outlook (an authoritative source of energy market analysis and projections) fossil fuel global consumption subsidies totaled nearly $650 billion in 2012! Ethanol subsidies are miniscule in comparison. The relentless attacks on corn-based ethanol are tiring.  However, if you are a corn producer you should probably do your part to keep the industry moving along.

For starters, if one of the following sponsors and co-sponsors of the new proposal are from your state….you should reach out to your Senator and try to educate them!

Dianne Feinsten (CA-D)

Tom Coburn (OK-R)

Kay Hagan (NC-D)

Richard Burr (NC-R)

Susan Collins (MA-R)

Pat Toomey (PA-R)

Jeff Flake (AZ-R)

Bob Corker (TN-R)

Jim Risch (ID-R)

Joe Manchin (WV-D)

You could also reach out to EPA or the White House or at least sign a petition. Here’s one place to start >

To read more about the ethanol industry’s response to the Feinsten-Coburn proposal, click on the link below.

That’s all for now. Let’s hope corn futures can get a correction rally going the start of next week.  For now, have a good weekend!

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