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Early Call 8:45am EST: Corn up $.02, soybeans up $.07, wheat up $.07. Continued

support from the fallout from yesterday’s RFS rumors, along with new month buying

from the funds, kept grain prices climbing overnight.

Grains: Grain and soybean futures bounced from multiweek lows Tuesday, rising amid

renewed buying by commodity funds and hopes that changes to U.S. biofuels regulation

could favor crop prices. Corn futures soared on speculation that an executive order by

President Donald Trump altering a federal mandate for blending ethanol into gasoline

was in the works. Potential changes to the nation's Renewable Fuel Standard could

broaden responsibility for mixing ethanol into the U.S. fuel supply and encourage the

use of ethanol over gasoline in fuel blends, a move seen by many traders as beneficial to

the U.S. corn industry. The White House, however, denied comments by an ethanol

industry group, the Renewable Fuels Association, that an executive order on the topic

was pending, and some analysts said the impact was overblown. A more plausible

explanation for the rally could be technical, with commodity funds working to establish

their month-end positions after prices fell yesterday to their lowest points in a number of

weeks. After a 114,000 drop in corn open interest since Feb 15th and 86,000 in

soybeans, money could be jumping back in. Corn futures for March delivery jumped

1.8% to $3.66 3/4, while soybeans rose 1.4% to $10.25. Potential changes to biofuels

policy by President Trump also are seen as positive for soybeans, used to make

biodiesel. Wheat futures enjoyed a bump in Tuesday's trading, with adverse weather

conditions potentially setting back production in the U.S. southern Plains. An

international tender for wheat by Egypt, the world's largest grain buyer, also spurred

optimism in the wheat market. CBOT March wheat futures gained 1.4% to $4.24 3/4.

Buying by commodity funds was broadly friendly for agricultural markets Tuesday,

acting as a reprieve from lower prices. Prices for grain and soybeans have drifted

downwards in recent weeks, as good South American weather increased expectations

that bumper harvests in the region could exacerbate a global grain glut.

Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach

3/1/2017

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South American weather is favorable, with drier/warmer weather featured across

Argentina after rains on Thursday, while near to above normal rain falls across

northern/central Brazil. The rains across N Brazil do not look to be exceptionally heavy,

but some delays in the remaining soy harvest could occur. Brazil saw scattered showers

across the northern portion of the country yesterday, with showers also returning to

southwestern areas. Rains will gradually diminish in northern Brazil during the week,

with regular showers continuing in the south/west over the next two weeks. Showers

will aid the safrinha corn crop, with minor fieldwork delays affecting Parana over the

next week before a break begins. It appears to be wettest in southern Brazil in March,

which will slow harvest at times, but provides relief in northern Brazil where harvest is

very active. Northern Brazil looks slightly drier in the 16-30 day period. Argentina will

see showers the next two days, the middle of next week and in the 11-15 day period,

aiding late soybean growth, with no notable wetness concerns. The 16-30 day period

looking drier in eastern Argentina on the CFS model than the EU model, but neither

model suggests notable harvest issues. In the U.S., Plains wheat looks dry this month,

with moisture to draw down and hamper growth in the last half of March. Rains

benefited the southwestern Midwest overnight, with more next week and wetter trends

in the Delta to aid SRW wheat, but will slow early corn seeding.

Brazil's soybean crop in early 2017 is likely to reach a record 105mmt against 95.4mmt

last year, helping to boost Brazilian soybean exports, Hamburg-based oilseeds analysts

Oil World forecast on Tuesday. "Brazilian exports will be up steeply from last year in

February and for February/August 2017 we expect record Brazilian exports of 52.3mmt,

4.5mmt more than last year." Overall, the weather is has been positive for soybeans in

Brazil, with yields in some key growing states exceeding expectations, Oil World said.

Noted South American crop scout Dr. Michael Cordonnier left his estimate of the South

American bean and corn crops unchanged this week. South Africa Crop Estimating

Committee released their estimate for 2017 corn production at 13.92mmt, well above

last year’s production of 7.78mmt, which was affected by drought. India is likely to

experience hotter-than-usual daily temperatures this summer, which could hurt the

standing wheat crop. "This year's forecast shows temperatures (maximum, minimum

and mean) across the country on an average would be one degree above normal"

through May, says the India Meteorological Department. Farm scientists say every

degree increase could pull down wheat yields by about 10%. January ran 0.67-degree

Celsius above normal and all of 2016 was the country's warmest year since 1901.

On the demand front, Asian crude palm oil future prices ended Wednesday's session

higher, tracking gains in soy oil prices. However, prices may face headwind amid

escalating concerns over rising production in the coming months. Israel is seeking

85,000mt of optional origin corn, with the tender closing Thursday. The USDA January

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soybean crush report today is expected to show 169.24mb of soybeans were crushed.

Soy oil stocks are also projected at 2.016 billion pounds.

Soybean exports from Brazil are being held up by heavy rains on a key highway. The

Brazilian government has been developing export capacity in the north of the country,

to allow for greater volumes to travel due north from Mato Grosso, for barge shipment

along the Amazon, easing pressure on the southern ports. But analyst Dr. Michael

Cordonnier reports problems along this route, with huge traffic jams and impassable

sections of mud. "The problem with shipping soybeans north out of Mato Grosso is the

fact that the only way to get soybeans to the ports on the Amazon River from most of

Mato Grosso is along highway BR-163 (see graphic)," Dr Cordonneir said.

"Unfortunately, the project of asphalting the highway from the city of Sinop in northern

Mato Grosso to the port city of Miritituba on the Tapajos River is behind schedule and

180 kilometres of the highway are still

essentially a dirt road" he said. "Recent

heavy rains have made the unimproved

section of the highway nearly

impassable," Dr Cordonnier said, noting

reports that transit has eased from around

800 trucks a day to just 100. "There are

reports of 4,000 to 5,000 trucks being

stuck in a 50-mile long traffic jam due to

the nearly impassable conditions," Dr

Cordonnier notes, adding that along one

stretch trucks must be pulled by tractors.

With the pace of trucks slowing to a

truckle, barges heading down the Amazon

are left waiting due to a lack of soybeans

for loading. The Brazilian president is in emergency talks with transport officials, to

resolve the problem. "The problem is temporary and it will be resolved, but it is another

illustration of how Brazil has struggled to improve its infrastructure," Dr Cordonnier

said.

The White House is denying comments yesterday by a top ethanol industry official that

the Trump administration is readying an executive order changing a hotly debated

provision of a federal mandate requiring ethanol be blended into gasoline. However,

most industry insiders argue that discussions and change are coming, the question is one

of degree? Such a change--broadening the categories of companies that face

compliance--would financially benefit a close Trump adviser: investor Carl Icahn, who

has controlling state in CVR Energy (CVI), which operates a refinery facing high

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compliance costs. Renewable Fuels Association President Bob Dineen says an

administration official informed him the executive order was "a done deal," so he says

he got assurances the administration would also help bolster ethanol producers' access in

the market. The key elements of the rumored bio-fuel announcement shifts

responsibility of RINS from refiners to position holders/blenders, E-15 will be made

available year round to expand summer use and the administration would support for

renewal of the bio-diesel credit, if approved by Congress, to be limited to U.S.

producers only, excluding Argentine methyl ester and Canadian canola. This could

boost U.S. soyoil demand for biofuels by 400-800 million pounds depending on the

mixture of feedstock used. If the EPA allowed/enacted E-15 usage yearlong, it could

boost U.S. corn grind rates for ethanol 150-250mb, but that would not move the needle

that far on total U.S. corn demand and U.S. ethanol producers are already producing at

rates well above the RFS annual demand. RFA’s Dineen, in a late morning interview

said “there is certainly something in the works, but they’re not going to confirm it until

they are ready to roll with it."

Other than a positive reaction from oil refiners, the rest of the renewable fuels industry

generally hates the rumored deal. The American Ethanol Coalition strongly condemned

the rumored changes, which they view as far from certain given the required public

comment period before enactment of any changes. The U.S.’s largest ethanol producer,

Poet, opposes the rumored changes which are “absent leading industry voices.” Even

the American Petroleum Institute (API), an oil lobbying group, opposes the rumored

change amid belief that “it would detract from broader attempts to overhaul the

Renewable Fuel Standard in Congress.” The Obama EPA had prior opposition to

rumored changes predicated on the view that doing so would make the Renewable Fuel

Standard more complex by expanding companies required to comply from hundreds to

thousands. Fuels America, an umbrella group of ethanol producers, farmers and trade

associations, voted yesterday to drop out of the Renewable Fuels Association. Farm

state senators have been quiet so far, but as details become more understood, that isn’t

supported to last. The only group to approve of the changes are U.S. refiners, who

support the rumored change amid prospects for higher margins as the majority of RIN

costs are shifted to retail customers. While views on generally negative on the impact of

ethanol usage if the rumored deal survives intact, soybean oil would appear to be the big

winner as the eventual renewal of the bio-diesel tax credit that prohibits use by foreign

producers fits perfectly with Trump’s “American First” trade policy.

Hogs: Cash hogs are called basically steady. As March begins, the USDA will begin to

survey pork producers and take the next temperature on herd expansion. The national

bid lost $.24 yesterday to close at $67.25 while the IA/MN bid lost $.03 to close at

$68.07. Weekly kill is up 4.99% compared to last year. Estimated packer margins were

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$23.84/head for non-integrators and $42.86/head for integrators vs. $19.29 and $38.84

the previous day. Cut out values gained $1.49 to close at $81.94 on decent movement of

348 loads. The loin was the only primal reported lower, down $1.10, while the belly was

up $6.67 after a double-digit slide on Monday. Relatively low ham prices should be

close to a seasonal bottom as demand tied to Easter heats up over †he next 30 days. Hog

carcass weights moved up last week, tied in part to lower slaughter levels. Weights are

expected to trend slightly higher on a seasonal basis. While discounted April live futures

may seem to have a natural attraction for new buyers, the looming large index fund roll

scheduled to start in a few days could limited any significant rally in the short term.

Hog futures slipped lower Tuesday as soaring wholesale pork belly prices sagged as

buyers found alternatives, cutting into demand. The USDA reported that pork belly

prices were down 13.31 cents a pound Monday at $1.4871 a pound versus Friday's price

of $1.6202 a pound. Last week the price had soared as high as $1.8529 per pound, more

than double the level of last August, with stocks of the popular cut used for bacon down

22% in January, month-on-month at 14 million pounds, the smallest stockpile in 60

years of data. You go high enough on prices, you start to cut into demand and run into

competing meats. Or, if you usually get three slices of bacon on your sandwich, now

you get two. Processors enjoyed record margins in the fourth quarter, but a rally in hog

futures has returned margins to historically average levels, with processors pushing back

in cash bids. CME lean hogs for April delivery ended down 0.8% at 67.6 cents a pound.

Traders in the lean hog market are anticipating lower prices by April, as evidenced by a

9 cent per pound discount in the April futures price compared to cash prices in the

physical market for hogs. In an average year, the April contract would be trading at a 4

cents per pound premium. The government is estimating record supplies of pork in the

second quarter--about 4.9% higher than last year--based on hogs that were born last year

that will be ready for slaughter. Traders have been closely watching daily slaughter

numbers in the hog market for signs of the start of a production boost. Tuesday's daily

hog slaughter was down 0.45% from a week ago and up 1.14% from last year. In other

markets, CME live cattle futures for February rallied 1% to settle at $1.266 a pound

ahead of Wednesday's online cattle auction and feeder cattle for March were up 1% at

$1.25075 a pound. The cattle market is anticipating tighter supplies following a storm

last week that disrupted finishing schedules. Traders are not going to get too excited

about the current rally as these are short-term issues.

Based off of the USDA’s estimates, the drop off in pork production from the 1st to 2nd

quarter is expected to be just 55 million pounds, the smallest decline since 2002 and

compares with a drop of 268 million pounds last year. The bearish outlook into spring

has left June hogs near the cash market vs. the 5-year average premium of $12.00.

However, that may be justified based on what happened in 2002, when June hogs posted

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a contract high of $68.20 in early Feb and hit a contract low in late May of $45.65. This

big discounts suggest that producers wait for a retracement rally to sell, but history

suggests they do indeed sell any further strength. Of course, the recent slaughter pace

has called into question the USDA’s latest H&P estimates from late December, as noted

in yesterday Daily Livestock Report (www.dailylivestockreport.com). Hog slaughter

last week was 2.280 million head, 2.6% higher than the previous year but substantially

lower than what was implied by the last ‘Hogs and Pigs’ report. Indeed, slaughter in

each of the last four weeks has undershot the projected target for this period. You will

remember that the last Hogs and Pigs report pegged the inventory of hogs weighing

between 120 and 179 pounds to be 4% higher than the previous year and the inventory

of hogs between 50‐119 pounds to be 4.5% larger than the previous year. But slaughter

in the past four weeks has been (in order) +3.6%, +3.2%, +2.7% and +2.6%. The miss

is big enough to make us question whether the last inventory count actually overstated

the number of hogs expected to come to market during the winter and spring months. It

could be that slaughter numbers have been lower than expected because tighter margins

no longer incentivize packers to run as hard as possible. Saturday slaughter in the last

four weeks has averaged 153,000 head compared to 134,000 head a year ago. Because

last year weekday slaughter was already near capacity, we would expect a much larger

Saturday slaughter in order to keep up with the larger supplies.

At this point it does not appear producers have fallen behind in their marketings

(another reason for thinking the inventory report overstated the case). The average

weight of barrows and gilts currently is hovering at 211.4 pounds compared to 212.5

pounds for the same period a year ago. The downtick in packer margins is real and

could be even worse if not for a continued improvement in by‐product values. For the

week ending February 25, we estimate the gross pork packer margin at $29.17/head,

slightly lower than it was at the same time last year and possibly in negative territory

depending on your assumptions on operating costs. The meat margin was $9.40/head

compared to $16/head a year ago. The bottom line is that as pork packer margins get

squeezed they will likely tend to slow down slaughter. The big unknown at this point is

whether the recent divergence of slaughter numbers from the December inventory

report is temporary or if market participants should price a smaller supply increase for

Q2. Keep in mind that the last USDA pork supply/demand table had pork production in

Q2 up over 6% compared to the previous year. Another source of extreme uncertainty in

the pork market is the direction in the belly market and export outlook. Belly prices in

recent days have been quite volatile. We had an almost 25 cent break in price in one

day, followed by some recovery but then another 13 cent decline yesterday. One thing

that stands out is the fact that as retailers wind down bacon features and prices climb to

what we think is the new standard retail price of $5.99, there is significant price erosion

at the wholesale level.

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Weather: Today's U.S. and European models are in poor agreement today. Today's

U.S. model is more likely to verify as it concerns the 6-10 day forecast period.

However, this is with some uncertainty due to differences between the models and a

significant change from yesterday. Today's European model at 8 to 10 days continues to

feature above normal heights and a little more of a flat ridge over the Midwest region.

This suggests a warm or very warm and dry period. The U.S. model shows a major

upper level trough over the Great Lakes region and southeast Canada. This implies a

much cooler to possibly colder situation for the Midwest region with some chance for

precipitation as it transitions from warm weather early in the period to somewhat colder

weather later in the period. This is new from yesterday, but it is supported by the

intermediate run of the model and is thus given somewhat more weight. Also of note on

these maps, the European model maintains the trough along and just off the west coast

of the Pacific Northwest and western Canada, while the U.S. model again features more

ridging just west of California. The trough implies more storms for the west coast, while

the ridge is more of a drier situation.

Rains of .25-.75” fell in most of Buenos Aries and far southern Santa Fe, with things

fairly quiet across the rest of the Argentine growing regions. High temps were in the

80’s and 90’s in most cases. A few scattered rains will fall through early Thursday and

then by later Thursday into Friday, a cold front will bring moderate rains to most areas.

Things then look to quiet back down for the weekend and first half of next week. Temps

will run above average in most areas this week, with highs in the upper 80’s and 90’s.

Readings for the weekend and next week look to be in the 80’s. Rains of .10-.50” fell

with coverage of around 65% in most of the Brazilian growing areas north of Parana,

with things fairly quiet in RGDS, Santa Catarina and Parana. Highs were in the 80’s and

90’s. Off and on showers and thunderstorms will bring light to moderate totals to

RGDS, Santa Catarina and Parana, with average amounts falling to the north of Parana

in the next 4-5 days. The 6-10 day sees close to average rains to fall in most areas, with

widespread coverage.

Things were mainly dry in the Plains yesterday. Light rains moved into eastern IA, most

of IL, WI and IN overnight. Totals have not been fully reported yet, but look to have

been generally less than .25” so far. Temps shot back to above average in the Plains and

Midwest, with highs in the 60’s and 70’s in the southern Plains and lows in the 20’s and

30’s. Fairly limited precip is seen for the Plains in the next week to ten days. An area of

low will bring snows of 3-6”+ to much of WI and northern MI, with rains finishing up

in the rest of the eastern Midwest today. The 6-10 day forecast sees some light to

moderate rains to fall in WI, MI and northern sections of IL, IN and OH by the first half

of next week and then moderate rains in all of the east late in the week. Temps will be

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running above average in most of the Plains, with average to a bit below average

readings in most of the Midwest the next few days and then temps in the Midwest will

warm to above average as well.

Global Weather Highlights: Favorable conditions for developing and filling corn and

soybeans continue in the major growing areas of central Argentina, with some

improvement in rainfall in the double crop soybean areas in the south. Generally

favorable conditions continue for harvesting soybeans and planting corn in central

Brazil and for filling soybeans in southern Brazil. Thunderstorms with heavy rain have

been reported in South Africa the past week. This will provide adequate to surplus soil

moisture for crops and is mostly favorable, except in areas of local flooding or severe

weather. Corn is likely reproductive to filling at this time. The FSU has no significant

cold weather threats at this time. Prior cold weather occurred during periods when snow

cover should have protected the crop from damage. A significant rain event spread

needed moisture to the winter wheat areas of Pakistan and India late in January. This

should supplement irrigation for the crop likely jointing to possibly early reproductive at

the time and will be considered favorable. Mid-summer hot, dry weather increased

stress to sorghum and cotton crops in Australia after a favorable start to the growing

season during the spring months. Recent rainfall and cooler conditions have helped to

ease stress to crops and will favor late development, especially for cotton.

North American Weather Highlights: The WCB/northern Plains will see no significant

weather impacting the transport for hogs or increase stress to livestock during the next

5-7 days. There should be mostly favorable soil moisture for the crop in the southern

Plains when it breaks dormancy in the spring due to heavy rains in early January and

additional rain during the winter favoring southern areas. Soil moisture has been

recharged in the ECB/Delta this winter after drought conditions in southern areas last

fall.

Macros: The macro markets were mixed as of 8:50am EST, with Dow futures up

0.8%, the U.S. dollar index is up 0.8%, crude oil is up 0.4% and gold is down 1.0%. The

S&P 500 on Tuesday closed 0.26% lower, the DJIA lost 0.12% and the Nasdaq lost

0.32%. The loss in the DJIA snapped the win streak at 12 days, just shy of the all-time

record of 13 set in 1987. Bearish factors included the unrevised U.S. Q4 GDP of 1.9%,

weaker than expectations of 2.1%, and long liquidation ahead of President Trump's

address to Congress on Tuesday night. Bullish factors included the unexpected 3.2

increase in U.S. Feb consumer confidence (Conference Board) to 114.8, stronger than

expectations of -0.8 to 111.0 and a 15-1/2 year high, and the 7.1 point increase in the

Feb Chicago PMI to 57.4, stronger than expectations of +3.2 to 53.5 and the fastest pace

of expansion in 2 years. The market consensus is for today's Jan PCE deflator to rise to

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what would be a new 4-3/4 year high of 2.0% from the 2-1/2 year high of 1.7% posted

in December. Of course, the headline inflation statistics are being pushed higher by the

rise in petroleum prices caused by the Nov 30 OPEC production cut agreement.

However, the core PCE deflator is close behind and is expected to be unchanged in

January from the December figure of 1.7%. That was just 0.1 point below the 4-1/2 year

high of 1.8% posted most recently in Oct 2016. The Fed is on firm ground when it

argues that inflation is very close to meeting its 2.0% target. A stronger-than-expected

deflator report today would likely cause the market to slightly bump up the odds for a

Fed rate hike at its upcoming meeting on March 14-15. The market consensus is for

today's Jan personal income and spending reports to both show increases of 0.3%

following the Dec report of 0.3% and 0.5%, respectively. The markets are watching to

see whether personal income can show a sustained rise with the stronger labor market,

which would be a critical ingredient for consumers to continue acting as the main driver

of the U.S. economy.

The market consensus is for today's Feb ISM manufacturing index be unchanged from

January's 2-1/4 year high of 56.0. The index was already rising before the election with

an overall 2.6 point gain to 52.0 seen in Sep-Oct. However, the index after the election

then moved sharply higher by another 4.0 points to post the 2-1/4 year high of 56.0 in

January. However, manufacturing confidence how appears to have paused in February

as manufacturing executives wait for more tangible results from the Republican agenda.

The market consensus is for today's Feb total vehicle sales report to recover to 17.70

million units, which would be mildly above the 12-month trend average of 17.45 million

units. Vehicle sales spiked up to an 11-year high of 18.29 million units in December

mainly due to sales incentives, but then fell back to earth in January to 17.48 million

units. The market consensus for today's weekly EIA report is for a 3.0 million barrel rise

in crude oil inventories, a 1.5 million barrel decline in gasoline inventories, a 1.0 million

barrel decline in distillate inventories, and a 0.2 point increase to 85.5% in the refinery

utilization rate. Crude oil remains in a massive glut at 39.6% above the 5-year seasonal

average. Meanwhile, product inventories remain ample with gasoline inventories 7.1%

above the 5-year seasonal average, while distillate inventories are 23.3% above average.

U.S. oil production in last week's EIA report rose by 0.3% to a new 11-month high of

9.001 million barrels. That is up by 573,000 barrels/day (+6.8%) from the 2-3/4 year

low of 8.428 barrels/day posted in July 2016.

Overnight, Bloomberg News reported that investors moved on from President Donald

Trump’s address to Congress, shifting their focus to the timing of a U.S. rate increase

as the dollar strengthened, stocks advanced and bonds fell. Robust factory data from

China spurred gains in metal prices. The Bloomberg Dollar Spot Index climbed the

most in a month, the yield on 10-year Treasuries rose to a week-high and European

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banking stocks surged after odds jumped for a Federal Reserve rate increase this

month. Shares of commodity producers found support from a report indicating

improving health for Chinese manufacturing which also helped prices for raw material

exports. The odds of an increase in March for U.S. interest rates rose to more than 60

percent, pushing up the dollar and dragging Treasuries lower. Federal Reserve Bank of

New York President William Dudley said the case for tightening has become a lot more

compelling. Fed Bank of San Francisco President John Williams said he expects a rate

increase to receive “serious consideration” at this month’s meeting. Trump in his

speech urged Americans to abandon conflict and help him remake the fabric of the

country, a moment he hopes will turn the page on his administration’s chaotic

beginning and bring clarity to his policy agenda. He offered few new proposals and

made no suggestions on how he would pay for his plans, including a replacement of

Obamacare, a tax overhaul including cuts for the middle class, $1 trillion in

infrastructure investment and a large increase in defense spending. Fed speakers aren’t

finished talking. There are other officials lined up for this week, including Chair Janet

Yellen, who speaks in Chicago on Friday. The Chinese People’s Political Consultative

Conference, an advisory body of more than 2,000 political elites, business executives

and others, opens its annual session in Beijing on March 3.

The Bloomberg Dollar Spot Index jumped 0.5 percent as of 11:30 a.m. in London,

climbing for a fourth straight day and heading for the biggest advance since Jan. 26.

The yen slumped 0.8 percent to 113.65 per dollar, for a third day of losses. The euro fell

0.4 percent to $1.0539 and the British pound weakened 0.4 percent to $1.2336.

European stocks climbed the most since Feb. 1, adding 1.1 percent as all industry

sectors advanced. A gauge of banks gained 2.2 percent, leading the advance, while

basic resources shares rose 2 percent. Health care stocks underperformed, with a gauge

for the sector gaining 0.1 percent. Trump told Congress that lawmakers need to bring

down “artificially high” drug prices. Futures on the S&P 500 Index added 0.5 percent.

The benchmark index finished February with its best monthly gain since March,

climbing 3.7 percent. Japan’s Topix index increased 1.2 percent, propelled by a weaker

yen towards the the biggest rally in more than two weeks. The Shanghai Composite

Index added 0.2 percent after data on the producer price rebound, giving top officials

gathering in Beijing a solid economic backdrop as they seek to rein in financial risks.

Yields on 10-year Treasuries rose four basis points to 2.43 percent, climbing for a third

straight day to the highest level since Feb. 21. Gold dropped for a third day, falling 0.3

percent to $1,244.79 an ounce after completing a 3.1 percent gain in February. West

Texas Intermediate Crude rose 0.2 percent to $54.13. Oil ended last month 2.3 percent

higher. Copper added 1.4 percent, advancing for a fourth straight session.

11

Summary: Corn and soybean futures went on a roller coaster ride yesterday, spiking

nearly 6% at one point, on ideas that the White House might allow an increase in the

blending of ethanol into gasoline, which would support demand for the corn-based

biofuel. The Renewable Fuel Association (RFA) offered a suggested resolution to the

long-standing question of who should hold responsibility for ensuring the inclusion of

ethanol in gasoline, and vegetable-oil based biodiesel into diesel. The responsibility

currently falls on refiners, although they can outsource this obligation by buying

Renewable Identification Numbers (Rins) from blenders who include biofuels. The RFA

said on Tuesday that it would accept these measures if the White House also increased

the amount of ethanol that could be blended into gasoline, with the cap raised from 10%

to 15% in summer months. The news sent corn prices soaring, with media sources

carrying reports from unnamed sources supposedly close to the issue that a presidential

memorandum was on its way. But White House spokeswoman Kelly Love later denied

these reports, saying "there is no ethanol executive order in the works". Corn futures

soared on the news, driven by ideas that higher ethanol blending will force facilities to

up their output, increasing corn demand. But prices trimmed gains as the level of

uncertainty over White House policy sobered up the market, particularly as a number of

biofuel groups opposed the deal. Ethanol futures rose to highs of $1.585 a gallon, but

finished up 1.4%, at $1.548 a gallon. May corn futures rose nearly 6%, to $3/86 ¼, but

trimmed gains to finish up 1.3%, $3.73, holding above the 200-day moving average.

The speculation was also supportive for soyoil, which is processed into biodiesel. Talk

was that it would move to the producer to shut off foreign made biodiesel from getting

the credit by offering to support reinstatement of the biodiesel blend credit as part of the

deal. This rumor propelled Chicago soybean oil nearly 6% higher at one point during

the session. May soybean oil futures spiked to highs of 34.74 cents a pound, but

trimmed gains a touch, to finish up 4.7%, at 34.15 cents a pound. May soybean futures

settled up 1.5%, at $10.37 ¼ after reaching highs of $10.56 ¼. Wheat prices were

supported by the strength in corn and soybeans, as well as a touch of bargain buying

after the May contract held above 100-day moving average. Late in the Chicago session

came another whopping wheat purchase by Egypt of 535,000mt of wheat. For the first

time this season, French wheat managed to win out, with two 60,000mt cargoes. Other

shipments came from Russia, Romania and Ukraine. The fact that French wheat is

competitive against Black Sea supplies underlines just how fast Russian wheat prices

have risen. The U.S. had presented one offer, but the price was not competitive. May

Chicago wheat futures settled up 1.3%, at $4.44 ¼.

May soybeans closed out Tuesday's wide-range session with a healthy gain, but settled

in the lower half of the daily range, which is a weak position. The action formed a

bearish shooting star on the daily candlestick chart, which is a negative formation and

marks out strong resistance at the day's high at $10.56 1/4. The bean bull's inability to

12

defend the rally above the $10.50 zone is a weak signal. The May bean contract pierced

initial 10-day moving average on the intraday rally, but then dropped back below that

level at the final bell, which is another weak signal. The minor trend pattern of the Jan.

18 high at $10.88 1/4 is negative, with lower daily lows and lower daily highs seen.

Initial resistance now comes in at $10.56 1/4, with a stronger ceiling at $10.74 1/2 and

that is the level the bulls would need to scale in order to break the downtrend and turn

the short-term trend bias to bullish. On the downside, strong swing low support is seen

at $10.17. May corn closed slightly firmer but in the lower half of Tuesday's large-range

session. The volatile action etched a large bearish shooting star on the daily candlestick

chart, which is a negative formation. Tuesday's action defines the $3.86 1/4 high as

major resistance and a potential near-term top. The intraday rally nearly matched the

recent high at $3.87 1/4, hit on Feb. 16. Despite the massive intraday swing on Tuesday,

May corn remains within its recent range, trading between the recent high at $3.87 1/4

and the recent low at $3.67 1/4, scored on Monday. The short-term trend bias is choppy

and neutral within the $3.87 1/4-$3.72 1/4 range. Corn bulls and bears are battling for

trend control. The recent rally stalled shy of the July price peak at $3.91 3/4. A large

daily base and bottom is seen on the daily chart, but the intermediate-term uptrend lacks

momentum and follow-through. The intraday picture is weak, with hourly momentum

pointing lower at mid-range levels. A drop below initial support at $3.71 3/4 would

open the door for downside probing toward next support points at $3.68 3/4 and then

$3.67 1/4. That latter level is strong daily chart support and could act as a hook for

sellers. On the downside, however, a breakdown below $3.67 1/4 would signal the corn

bears are gaining fresh momentum, with the next minor support zone at $3.65 and major

support at $3.63, the Jan. 30 swing low.

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