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Profit Watch Commentary – Nov. 15, 2013

Ouch!  Soybeans got smacked today.  A disappointing weekly sales figure from USDA for soybeans and soybean oil greeted the trade first thing this morning.  Then, Informa reminded the world that U.S. producers are likely to plant a record number of soybean acres next year.  Finally, the EPA rolled out some negative news late in the session.  A proposed cut in the RFS mandate for bio-diesel hit the soybean market hard in the closing minutes.  The January bean contract was down more than 35 cents at the low of the day.  March corn was down 6 1/2 cents at the low as the news was bearish for ethanol as well.

Rumors have been swirling for at least a week that the EPA was going to make a major announcement about the Renewable Fuels Standard.  They did in fact roll out a proposal about 15 minutes before the session ended that (if approved) will slash 2014 biofuel requirements by 16%.  Big Oil got what they wanted in the proposal. It’s the same proposal that was leaked last month that also spooked the marketplace.  They say it’s all about the “blend wall”.  In effect, the refiners are saying that the RFS requirement will require the use of more ethanol than can be blended into gasoline at the 10% level.  And, that if it’s left in place it will force refiners to export more fuel or produce less gasoline, leading to shortages and higher prices at the pump.  Seems to us that a logical fix would be to blend 15% ethanol into the gasoline supply.   But, that’s another fight and another argument for another day.

It’s hard to say at this point if there’s more downside in corn and soybean prices due to this development.  The EPA stated that these are proposals only.  A 60-day comment period will be opened up soon for the pros and cons to be forwarded for review.  The EPA says it will likely be next spring before the new minimum requirements are instituted.  It should also be pointed out that the levels we’re referring to here are MINIMUMS only.  Ethanol production has exceeded these RFS mandated levels in 6 of the past 7 years.  That being said, we are concerned that some in the trade (the funds, weak longs and perhaps farmers) will view this development as a “tipping point”.  Last week’s low of $4.15 1/2 could be a target to start next week.  The bears will be gunning for it and the bulls may want to test it for signs of stability.

Weekly export sales were announced this morning.  The corn number at 47 million bushels was well above expectations and puts sales to date at DOUBLE the amount we had on the books a year ago this time. The sales figure for soybean meal was about as expected.  Everything else was under expectations.

Trade Range of Estimates       This week           Last Week

Corn         31 – 39  mln bu          47.4 mln bu         67.7 mln bu

Beans        33 – 44  mln bu          31.2 mln bu         37.4 mln bu

Wheat        13 – 20  mln bu          10.6 mln bu         15.3 mln bu

Meal        200 – 350(000) tonnes    283,200 tonnes      287,800 tonnes

Oil          25 – 50 (000) tonnes      7,200 tonnes       65,900 tonnes

See below for the Informa planted acreage numbers released this morning. Their corn and soybean acres were trimmed just slightly from last month.  They now see 3.9 million less corn, 1.2 million more wheat and a whopping 7.4 million more beans.  Informa did not update their yield and production numbers.  However, we’ve posted their numbers from last month and the latest estimates from USDA for this year’s crops.

Total Production     Planted Acres       Yield

INFM Oct 2014 Corn   13.692 bln bu       91.7 mln acres      163.0 bpa

INFM Nov 2014 Corn                       91.5 mln acres

USDA Nov 2013 Corn   13.989 bln bu       95.4 mln acres      160.4 bpa

INFM Oct 2014 Beans   3.684 bln bu       83.9 mln acres       44.5 bpa

INFM Nov 2014 Beans                      83.8 mln acres

USDA Nov 2013 Beans   3.258 bln bu       76.5 mln acres       43.0 bpa

Here’s a quick snapshot of corn basis bids as of this afternoon.  The first four bids are processor bids across the Corn Belt.  Of course, the New Orleans bid is at the Gulf of Mexico.  The landscape has sure changed.  It’s hard to believe that the best bid in the Corn Belt the month of November is at a land-locked location in NC Iowa. A brand new 150,000/day Cargill ethanol facility that’s opened right across the road from a 100,000/day VeraSun ethanol facility has created a “black hole” of demand.

Blair, NE    Ft Dodge, IA    Decatur, IL    Lafayette, IN    New Orleans, LA

+ 5            +35            +10             -10               +85

That’s all for now.  Have a great weekend!

CBOT  Closes                  Today    Wkly Chg      Yearly Highs

Dec 13 Corn   $ 4.22         -  4 1/2   -   4 3/4    $ 6.05

May 14 Corn   $ 4.30 1/2     -  6       -   8          $ 6.14

Jul 14 Corn   $ 4.45 3/4     -  6 1/2   -   8          $ 6.21

Dec 14 Corn   $ 4.59 3/4     -  6 3/4   -   8 3/4    $ 5.87 3/4

Dec 15 Corn   $ 4.76 1/4     -  7       -   5 1/2      $ 5.68 3/4

Jan 14 Beans  $12.80 1/2     - 33       -  15 1/2     $14.06

Mar 14 Beans  $12.65 3/4     - 31 3/4   -  11         $13.77 3/4

Jul 14 Beans  $12.45         - 30 3/4   -   8 1/4     $13.50 3/4

Nov 14 Beans  $11.53 1/2     - 23 1/2   -   7 1/2     $13.15

Nov 15 Beans  $11.45         - 23 1/2   -  10 1/4     $12.71 1/2

Dec 13 Wheat  $ 6.44 1/2     -    1/4   -   5 1/4     $ 8.34 1/2

Mar 14 Wheat  $ 6.54 1/2     -    3/4   -   7         $ 8.45

Jul 14 Wheat  $ 6.55 3/4     -  3 1/2   -  12 3/4     $ 8.22 1/4

KCBT Closes

Dec 13 Wheat  $ 6.98 1/4     -  4 3/4   -  10 1/4     $ 8.90

Mar 14 Wheat  $ 7.00 1/4     -  4 1/2   -  11         $ 8.90 1/2

Jul 14 Wheat  $ 6.90 3/4     -  6       -  15 3/4     $ 8.39

MPLS Close

Dec 13 Wheat  $ 6.96 3/4     -  3 1/4   -  11 1/4     $ 9.03 1/4

Mar 14 Wheat  $ 7.06 1/2     -  3 1/2   -  13         $ 9.06 1/2

Jul 14 Wheat  $ 7.21 1/4     -  1 3/4   -  11 1/2     $ 8.90

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