What Traders are Talking About:
Overnight highlights: As of 6:00 a.m. CT, corn futures are 3 to 4 cents lower, soybeans are mostly 3 to 5 cents lower and wheat futures are fractionally to 2 cents lower. The RFS cut talk, ongoing uncertainty in Washington and harvest pressure are expected to keep bears in control. Cattle futures are expected to open with a choppy tone as traders await cash cattle trade. Hog futures are also seen opening mixed.
* RFS cut talk hits corn. Corn futures are under increased pressure after media and wire service reports Thursday signaled the Environment Protection Agency has proposed cutting the ethanol mandate in the Renewable Fuel Standard for next year and 2015. EPA is proposing a 15.21 billion gallon Renewable Fuels Standard (RFS) for 2014, including a 2.21 billion gallon level for advanced biofuels and 23 million gallons for cellulosic ethanol and it would set the corn-based ethanol component at 13 billion gallons. That would be some 800 million gallons below the 2013 corn-based ethanol component at 13.8 billion. Indications are EPA readied three options for 2014 with each one at a total 2014 RFS of 15.21 billion gallons, but different levels of corn-based ethanol and advanced biofuels. One plan in an EPA proposal would set the corn-based portion at 12.36 billion gallons while a third option would put it at 13.18 billion gallons. Under the three options, the advanced biofuels component would be adjusted to keep the total level at 15.21 billion gallons. It is still not clear if the document that surfaced is the final plan as the matter remains under consideration at the Office of Management and Budget (OMB) and won’t likely be finalized until after the government reopens. For a deeper look at this situation, click here.
The long and short of it: What's being lost in much of the media and wire service coverage of this situation is that this is just an EPA proposal subject to interagency review. Also, if this would go through, it would simply lower the mandated level (floor) of ethanol production... not put in a ceiling. Ethanol production could, if market conditions warrant, go above the mandate.
* USDA's October crop reports postponed, may be canceled. The government shutdown has postponed delivery of the October Crop Production and Supply & Demand Reports, originally scheduled for release today and could cancel the reports. We believe USDA’s National Ag Statistics Service will deliver Oct. 1 estimates based on data collected ahead of the Oct. 1 shutdown -- probably before the end of the month. But it depends on when the government reopens. There is data (partial?) available for an Oct. 1 crop estimate, but what concerns us most is data being lost for the November Crop Production Report. Another concern is the measure of harvest loss -- grain left on the ground after harvest. USDA's World Board uses NASS's crop estimates to help formulate its monthly Supply & Demand tables.
The long and short of it: We’re asking officials how potential lost data might impact upcoming crop estimates. Lost yield data only lowers the reliability of crop estimates. That means another year of uncertainty about total corn and soybean supplies.
* Texas Swift Beef plant not eligible to ship beef to South Korea. The Cactus, Texas, Swift Beef Co. plant is not eligible to ship beef to South Korea, according to a notice issued by USDA's Food Safety and Inspection Service on Thursday. No explanation for the stoppage was given in the notice, but it came one day after South Korea halted beef imports from a Swift Beef plant after finding traces of Zilmax in a 22 MT shipment. Wire services previously reported the beef was from a Colorado Swift plant, but it now appears it orginated from the Cactus, Texas, plant.
The long and short of it: Traders are generally brushing aside the Swift Beef news as its seen as a temporary situation since the use of Zilmax is being reduced. The death loss in South Dakota due to last weekend's blizzard is offsetting the negative aspects of the beef news.
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