The grains rally sagged on Friday as investors took profits
and US weather forecasts turned a little wetter, although doubts over rumours
about ethanol production cutbacks helped prevent a rout.
Corn for December closed down 2.3% at $6.93 a bushel in Chicago, undermined by a temptation among investors to book gains
ahead of the weekend, when they will be unable to react to changes in the
weather outlook on which the market is hinging.
The latest weather run moved rains set to kick in later next
week "about 100 miles to the north, meaning they will help a lot of the main grain
area" in the Midwest, where dryness and heat have lowered yield expectations,
Jerrod Kitt at Linn Group said.
Furthermore, Informa Economics ended the run of ever-more-pessimistic
forecasts for the US corn yield by trimming its estimate by 1.4 bushels an acre
from end of June to 153.5 bushels per acre.
While this figure is still below the US Department of
Agriculture's official figure of 166 bushels per acre, most brokers that Agrimoney.com
speaks to are talking of a yield below 150 bushels per acre.
Tenco overnight lowered its forecast to 145 bushels per
Bulls gained some consolation from growing doubts over
rumours that the Environmental Protection Agency is, in response to fears for the
US corn harvest, to lower by 20% the mandate for ethanol, the production of which
swallows some 40% of the crop.
Country Futures, terming the speculation "very concerning", said that "a 20% reduction would be a 1bn-bushel reduction in corn use [for ethanol]. Keep an eye on this!"
However, at Benson Quinn Commodities, Jon Michalscheck said that last
year, "the yield was down to 147.2 bushels per acre, with prices just pennies
short of $8.00 a bushel, and that didn't seem to get the government too excited
about changing any mandate".
At Linn Group, Mr Kitt said: "If corn goes to $8-9 a bushel,
there are going to be calls from certain sub sectors to do something. And this
is an election year."
However, it was "premature" to talk of such a move now,
before a lower yield had been officially confirmed, and at what level.
An EPA spokesperson told Agrimoney.com: "I have not heard anything
about this [proposal]."
The weakness spread to soybeans too, which for November delivery
finished 1.2% lower at $15.05 ¾ a bushel.
Informa lowered its estimate for the US soybean yield by 0.7
bushels per acre to 42.0 bushels per acre, again, above some other forecasts.
"The trade has already begun to revise yields lower, in some
cases near 41 bushels per acre," Terry Roggensack at Hightower Report said.
Chicago wheat for September fell 3.8% to $8.06 ¼ a bushel, a
decline which still leaves the contract up more than 6% for the week.