In what started out as a pretty ugly week in the corn market, December corn actually managed to scratch out a $.005 higher close for the week. Last week finished with the EPA announcement that they will be proposing a cut in the Renewable Fuels Standard target to 15.21 billion gallons. The selloff that began in the last 15 minutes of last Friday’s trade on the heels of the announcement, followed through to Monday morning.
The early week weakness was compounded by news that China had cancelled a cargo of US corn due to an un approved GMO trait. Although questions quickly arose as to the true motivation surrounding the cancellation, the market took a "sell first, ask questions later" approach to the news. The break created new 3 year lows in the corn market.
By mid-session on Tuesday the corn market had found support and began to bounce from its oversold levels on the back of a strong ethanol announcement and good exports on Thursday.
Ethanol prices surged this week, strengthening the profit margins for ethanol producers and raising bids for cash corn in order to encourage producers to part with recently stored bushels. Reports of $.15 jumps in cash bids by ethanol plants late week were not rare.
We used the softer market early in the week to lift hedge protection in corn and will look for a $.15-$.30 rally from Friday’s closes to once again add back some hedge coverage. In the meantime, producers can look to the short dated new crop corn options as safety net protection for the 2014 crop through the winter months.
(Click to see larger image)