U.S. grains: Corn drops, soybeans rise on new biofuel targets

Chicago | Reuters –– U.S. corn futures fell on Friday and posted a second straight weekly decline after the U.S. government lowered its targets for ethanol blending and as corn export demand slumped for the crop harvested this autumn.

Soybeans rose about one per cent, led by sharply higher soybean oil futures as the U.S. Environmental Protection Agency (EPA) raised its target for use of biodiesel, for which soyoil is a key feedstock.

U.S. wheat fell sharply to a two-week low on weak export prospects and as forecasts for drier weather in the southern Plains eased concern about crop damage.

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The EPA on Friday unveiled much-anticipated targets for the blending of renewable fuels for the three years to 2016, trimming ethanol quotas for this year and next but raising targets for biomass-based diesel.

“There’s some disappointment in the corn about the EPA numbers on ethanol. We’re already producing ethanol at levels above the mandates so the trade is concerned that production would decline if corn prices rise,” said Rich Nelson, chief strategist with Allendale Inc.

Limiting declines, however, was data released on Thursday that showed actual U.S. ethanol production was ahead of pace to reach the U.S. Department of Agriculture’s forecast for this season, he added.

Chicago Board of Trade July corn fell two cents, or 0.6 per cent, to $3.51-1/2 a bushel (all figures US$). The spot contract surrendered 2.4 per cent in the week and posted a third straight monthly drop.

Sluggish export demand for crops harvested this autumn hung over the market as USDA on Friday reported net negative sales last week following the cancellation of purchases by China.

CBOT July soybeans added eight cents, or 0.9 per cent, to $9.34 per bushel, fueled by a nearly four per cent jump in soyoil. Soybeans notched the first weekly gain in three weeks but prices were down 4.3 per cent for the month.

Expectations that a crusher strike in Argentina would be resolved kept a lid on soybean prices.

July soft red winter wheat fell 11-3/4 cents, or 2.2 per cent, to $4.77 a bushel. July hard red winter wheat dropped 11-1/2 cents or 2.1 per cent, to $4.98-3/4 a bushel.

Both markets notched weekly losses of about eight to nine per cent, among the steepest since last July. However, both posted monthly gains after rallying earlier in May on risks of rain damage to U.S. wheat.

Analysts said evidence of yield losses in places such as Russia was needed to trigger further gains.

Karl Plume reports on agriculture and ag commodity markets for Reuters from Chicago. Additional reporting for Reuters by Gus Trompiz in Paris and Colin Packham in Sydney.

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