CBOT weekly outlook: Traders look for fire behind the smoke

CNS Canada –– Rumoured changes to U.S. renewable fuels policy gave corn and soybean futures at the Chicago Board of Trade a boost this week — but it will likely take confirmed fundamental news for the advances to be sustained.

The unconfirmed reports circulating the market on Tuesday were that U.S. President Donald Trump was close to signing an executive order that would move the point of obligation under the country’s Renewable Fuel Standard from refiners to blenders farther down the supply chain.

Expectations that the order would include expansions to the amount of higher-blended E15 ethanol allowed to be sold in the country, tax credits for biodiesel and restrictions on biofuel imports were especially supportive for grains and oilseeds.

While the reports could easily remain unconfirmed, many traders were also taking the “where there’s smoke, there’s fire” approach, according to Preston Zacharias of CHS Hedging’s Russell Consulting Group in Minneapolis.

He linked the rally in corn and soybeans to formerly bearish speculators who were put “on their heels a bit.”

The White House issued a statement denying any changes to the renewable fuels policy were imminent, but the initial rumour remained supportive on Wednesday.

Additional gains in the futures may be limited without actual confirmation of the biofuel news, or other fresh fundamental news, according to Zacharias. Such a weather event was unlikely at this time of year, he added.

Attention will soon turn to spring seeding in the U.S., with the U.S. Department of Agriculture recently forecasting an increase in soybean acres on the year and a decrease in corn.

With soybean prices looking considerably stronger than they were at the same time a year ago, Zacharias said actual soybean acres could end up above the 88 million currently forecast.

Any additional soybeans likely wouldn’t come at the expense of corn. Rather, he expected more spring wheat acres in the northern-tier states could swing over to soybeans after growers had a successful year in 2016.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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