Grain futures mixed, corn near three-year low levels as U.S. may trim renewable fuel quota

Grain futures were mixed on Monday with wheat and soybeans marking an advance, while corn hovered near three-year low levels following a U.S. proposition for a cut in refineries renewable fuel quota, limiting demand prospects for grains used for the production of biofuels.

On the Chicago Board of Trade, corn futures for settlement in December fell by 0.72% to $4.1838 per bushel by 15:01 GMT. Prices plunged to a session low of $4.1613, near November 8s 38-month low of $4.1562 a bushel, while days high stood at $4.2238. The grain lost little over 0.9% on Friday, a fourth straight daily decline, and settled the week 1% lower after it fell by 3.2% in the preceding two five-day periods.

Corn fell to a one-week low after the U.S. Environmental Protection Agency said in a draft rule released on November 15 it would require less gallons of renewable fuels in 2014 from a year earlier, the first reduction in the mandate since it was set in a 2007 legislation. The quota is expected to be reduced to between 15 billion and to 15.52 billion gallons of biofuels such as ethanol and biodiesel, down from 18.15 billion.

Meanwhile, U.S. farmers are expected to harvest a record 13.989 billion bushels of corn in the 2013 marketing season.

Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, said in a note, cited by Bloomberg: “The proposal is negative for corn and soybean markets, however the proposal must now go through a number of hearings before it becomes law.”

Elsewhere on the market, soybeans advanced but remained near 1-week low levels. Futures for settlement in January rose by 0.36% to $12.8463 per bushel by 15:05 GMT. Prices held in range between $12.8688 and $12.7675, the weakest level since November 8. The oilseed plunged by 2.6% on Friday and settled the week 1.2% lower.

Corn and soybeans were further pressured on outlook for favorable weather in the U.S. DTN reported on November 15 that light rainfall during the weekend may slow field work in the Midwest but drier weather was expected to provide suitable conditions afterwards.

The USDA reported in its latest crop progress last Tuesday that 91% of soybeans were harvested as of November 10, 1% less than the five-year average and below last year’s 95% during the comparable week. Meanwhile, U.S. farmers had collected 84% of corn, 5% above the five-year average but below last year’s 97% during the comparable week.

DTN also reported on Friday that thunderstorms in Brazil will maintain adequate soil moisture for early development of corn and soybeans, which however would cause some planting delays. In South Africa, mixed weather conditions will provide mostly favorable conditions for planting and early development of corn.

Wheat rises

Wheat also gained on Monday as hot and dry weather threatened the crop in Argentina but remained near two-month low levels amid favorable outlook in other key growing areas. Futures for settlement in December traded at $6.4688 per bushel at 15:04 GMT, up 0.29% on the day. Prices shifted between days high of $6.4963 and session low of $6.4463, near November 13s two-month low of $6.4362 a bushel. The grain lost 0.2% on Friday and settled the week 0.7% lower.

The grain drew some support last week on signs of increased demand for U.S. exports. According to data by the USDA, U.S. exporters sold 2 million tons of wheat to Brazil in the nine months through September, the most in 35 years.

Prices were however pressured last week after the U.S. Department of Agriculture reported on Tuesday that 95% of wheat was planted through the week ended November 10, above the five-year average of 93% and last year’s 94% during the comparable period. The report also showed that 84% of plants had emerged last week, exceeding the average of 80% and 2012′s 78% during the same period.

Also fanning bearish sentiment, DTNs November 15 forecast called for favorable conditions for soft red winter wheat in the eastern and southern parts of the Midwest. The agency also reported that mild weather and recent scattered showers continued to favor the pre-winter development of wheat in the Southern Plains.

In Argentina, dry weather in La Pampa and western Buenos Aires will increase the risk of developing wheat, while recent showers in central China helped improve conditions for developing winter wheat and rapeseed, DTN reported on Friday.