Week 7 – The Road Ahead : with if’s

There are 2 major things that should most likely to make a notable impact on the futures market this week. First, Tuesday, Nov 6 is the US presidential election day. Second, USDA will be releasing their monthly crop estimation on Friday Nov 9.

Some commentary mentioned that if Romney won the election, he would end the ethanol mandate put in place by Obama which would affect the ethanol price, as a result,  hit the corn market as well^[1].  Under the ethanol mandate, about  15  percent  of  global  corn  production  is converted  into  ethanol  for  fuel  use^[2]. This has largely driven up the corn prices. Therefore, if the ethanol mandate would be lifted off by any chance (if Romney got elected), we should anticipate the corn prices to fall.

On the other hand, analysts suggested that the US 2012 soybean and corn harvests were larger than what the USDA projected in October^[3]. Therefore, if the report corrected the estimation with higher crop production, the futures prices of corn and soybeans should go down for the day trade on Friday.

As for the wheat market, I anticipate it to be bullish under the tight supply and increasing demand in the world market.

Cheers.

References:

1. Cummans, Jared. (2012, Oct 13). 4 Investing Opportunites From the Inside Commodities Conference. Retrieved from http://commodityhq.com/2012/4-investing-opportunites-from-the-inside-commodities-conference/

2. Carter, Coin. (2012). The Effect of  the U.S. Ethanol Mandat on Corn Prices. Retrieved from  google doc (for short).

3. Reuters Africa. (2012, Nov 2). GRAINS-Corn, soy fall on private US crop estimates, firm dollar.  Retrieved from http://af.reuters.com/article/commoditiesNews/idAFL3E8M261J20121102