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BIOFUEL

PM markets: biodiesel hopes fuel soybean rally
Soybean futures enjoyed a short-covering rally, in a quiet day's trading, as US markets wind down ahead of the holidays.

US markets will be closed on Thursday for Thanksgiving, and see a shortened trading session on Friday.

"Price action today and Friday could reflect a lack of participation due to the holiday," noted Brian Henry, of Benson Quinn Commodities.

"The main characteristic of holiday trade is always depressed volume," noted Tregg Cronin, of Halo Commodities.

Tensions rise

Crop prices came under pressure from the dollar, which surged to its highest level since February early in the session, before falling back to around 0.1% up against a basket of world currencies, as Chicago markets closed.

The tension between Russia and Turkey, sparked by the shooting down of a Russian jet on the Syrian border on Tuesday, have added a degree of risk to agricultural markets.

The Russian agricultural minister warned that grain exports meant for Turkey could be diverted elsewhere in the Middle East.

Turkey has accounted for 12% of Russia's export demand so far this year, or 3.5m tonnes.

Biofuel boost

Soybeans showed some action, as January futures broke through the 20-day moving average for the first time this month.

January soybean futures rose 1.2% to $8.75 ¼ a bushel.

Soybeans were lead higher by soyoil, which is getting fillip from hopes of increased biofuel demand.

Speculation is gathering that the US Environmental Protection Agency will increase mandatory biofuel requirement in the coming days.

The US imposes blending requirements, which force fuel providers to blend a certain proportion of biofuels into their products.

Rising demand

Ethanol, which in the US is produced primarily from corn, is blended into gasoline, and biodiesel, which is produced from vegetable oils such as soyoil, is blended into diesel.

On Tuesday Reuters quoted sources that who said that the increase would create demand for another 400m to 500m gallons of ethanol and biodiesel next year, increasing the total mandatory usage to around 18bn gallons.

These quotas are key for biofuel prices, as the low cost of oil provides little incentive for voluntary blending.

January soyoil futures rose by 2.1%, to 29.21 cents a pound.

Record production

But ethanol didn't enjoy a similar rally, as US production hits record levels.

Weekly ethanol production is up by 33,000 barrels a day, the agency said, breaking through the 1bn barrel a day mark for the first time ever.

Ethanol stocks are up 378,000 week-on-week, to 19.63bn barrels.

January ethanol futures in New York closed down 1.0% at $1.484 a gallon.

March corn closed up 0.2% at $3.66 a bushel.

France gets cheap freight boost

Meanwhile French wheat has been benefitting from cheap shipping, which is opening up new markets for this year's record crop.

After winning contracts to ship to Indonesia for the first time in years this week, French suppliers were successful in an Egyptian tender.

The tender saw Gasc, the state grain buyer for the world's largest wheat exporter, take at 120,000 tonne cargo of French wheat, the largest from that country since April.

At $205.74 a tonne including freight, the French origin wheat was the most competitive, although smaller cargos from Russia and Romania were also taken.

December Paris wheat closed up 1.1% at E178 a tonne.

March Chicago wheat, the most widely traded contract, closed down 0.3% at $4.87 ½ a bushel.

Rocky real

Sugar markets have been spooked by the prospect of Indian selling.

Indian sugar mills are holding onto a hefty inventory, and news of a new subsidy, to be paid directly from the government to cane growers, has raised the possibility of renewed exports.

Reuters reported dealer rumours of the sale of at least 100,000 tonnes of raw sugar, which may be destined for Bangladesh and Iraq.

And the Brazilian real had a rocky day as well, which weighs on prices as it can spark selling from the world's biggest exporter.

"The market is simply attempting to find its level and the recent, mainly Funds led rally, has been halted for the time being," said Nick Penney, senior trader at Sucden Financial.

Raw sugar futures in New York settled down 0.6%, at 14.91 cents a pound.

Cotton rallies

The weak real was bearish for coffee as well.

January robusta futures settled down 1.2%, at $1,532 a tonne. But March arabica settled 0.8% at 125.55 a pound.

And cotton rallied, as some unwanted rains head for Texas.

March cotton settled up 2.16%, at 63.28 cents a pound, after touching one month highs.

http://www.agrimoney.com/marketreport/pm-markets-biodiesel-hopes-fuel-soybean-rally--3395.html

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