Looser US grain futures cap neutral for biofuels

HOUSTON (ICIS news)--Looser daily limits on price movements in US grain futures would likely not influence the actual trend of those prices, a marketing specialist for a university said on Tuesday.

"It would seem to be kind of a neutral thing for producers," said Darrel Good, a University of Illinois Extension marketing specialist. "I think the prevailing opinion is to let the market determine value."

Soaring agricultural commodity values have driven up fertilizer prices as US farmers seek to maximise returns by planting extra corn in particular.

In turn, the squeeze on ethanol and biodiesel producer margins from higher corn and soy oil prices has pushed down operating rates and delayed some projects.

Massive trading in nearly all commodities has led to increased US speculation in the futures for grains, said Good.

Interest in ethanol and other biofuels has led to only some of the heightened speculation in corn, soybean and wheat futures, he said.

"I think that's certainly part of it," Good said. "A tremendous part of it, though, has been the heightened interest in commodity markets in general."

The nation's largest commodities market, CME Group in Chicago, had earlier announced new daily price limits for corn, soybeans and soybean oil approved by the Commodity Futures Trading Commission (CFTC).

Wider limits for those commodities should favour traders, Good said.

Matt Hartwig, spokesman for the Renewable Fuels Association (RFA), said the US stock market's decline is the biggest driver of skyrocketing prices in corn, soybeans and wheat.

"The reason you see such volume in all commodities, whether it be crude oil or corn or wheat, is because when the dollar's weak, people pull their money out of the stock market," Hartwig said.

Interest in developing ethanol and other biofuels has contributed in only minor fashion to speculation in feedstock commodities for those fuels, he said.

"Its role in driving corn to where it is today is very minimal," Hartwig said.

The RFA has campaigned vigorously against claims that ethanol in particular has driven up food prices. According to US government estimates, ethanol plants consume around a quarter of the country's corn crop.

The National Grain and Feed Association (NGFA) opposed wider trading limits for agricultural futures in January, asking the CFTC to delay its approval for at least a year to deal with increasing discrepancies between futures prices and physical cash prices for those commodities.

The regulator has scheduled a public hearing on 22 April in Washington, DC to discuss the lack of convergence between futures and cash prices, with a particular focus on wheat and cotton.

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