The investment objective of the Fund is to have the daily changes in percentage terms of the Shares’ net asset value (“NAV”) reflect the daily changes in percentage terms of a weighted average of the closing settlement prices for three futures contracts for corn (“Corn Futures Contracts”) that are traded on the Chicago Board of Trade (“CBOT”), specifically (1) the second-to-expire CBOT Corn Futures Contract, weighted 35%, (2) the third-to-expire CBOT Corn Futures Contract, weighted 30%, and (3) the CBOT Corn Futures Contract expiring in the December following the expiration month of the third-to-expire contract, weighted 35%, less the Fund’s expenses. (This weighted average of the three referenced Corn Futures Contracts is referred to herein as the “Benchmark,” and the three Corn Futures Contracts that at any given time make up the Benchmark are referred to herein as the “Benchmark Component Futures Contracts.
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Archer Daniels Midland (ADM) complained it had invested in renewable fuel projects "on the basis of firm legislative commitments" and across two presidential administrations.
Green Plains (GPRE) CEO Todd Becker calls the prospect of the U.S. turning away from a cheap and domestically produced fuel source "disgraceful."
Although "disappointed," Renewable Energy (REGI) CEO Daniel Oh says the company's scale would "allow us to continue to succeed."
"While we still think a large U.S. corn crop in 2013 will benefit other ADM businesses, we see the renewable fuel proposal as adding risk to the shares," says S&P Capital IQ's Tom Graves, who downgraded ADM shares to Sell from Hold after the announcement.
The new proposal angers farm groups, corn ethanol producers and supporters of biodiesel, but it's a victory for oil companies, which have long argued that if the content of ethanol in motor fuel exceeded 10% - i.e., the "blend wall" - it might damage cars, motorcycles and lawn mowers.
The administration also is setting a 2B-2.5B gallon target range for all advanced biofuels (earlier).
Government shutdown could send ag markets into turmoil
The U.S. government shutdown and the resulting lack of official statistics are prompting traders to shun agricultural commodities due to concerns about the vacuum of information and fears of a data dump that will hit markets hard when the shutdown ends.
Likely to fall victim to the shutdown is the USDA's monthly Wasde crop production report, set for Oct. 11, which affects prices of grains and other agricultural commodities around the world.
Analysts say concerns over a delay could lead to additional short-covering as speculative shorts look to take risk off the table; once the USDA resumes operations, a torrent of backlogged data could trigger a highly volatile reaction.
Corn slides to 3-year low after bearish stocks data
Corn (CORN -2.4%) and Soybeans (SOYB -3.2%) tumble - with corn hitting a 3-year low - after the USDA reports estimated corn stocks of 824M bushels, off 17% from a year ago, but far higher than trade estimates for 687M. Bean stocks are estimated at 141M bushels, also off 17% from a year ago, but 13% above estimates. Stocks still remain low, but these are old crop numbers, and forecasters are looking forward to a big crop this fall.
Wheat (WEAT -2.7%) stocks of 1.85B bushels were slightly below expectations.
Lower-than-expected feed usage and export demand were behind the big corn number - high prices had pig farmers substituting corn for wheat.
Corn slides as USDA ups production and ending stocks
December Corn slides nearly 3% after the USDA revises upward its estimate for ending stocks to 1.855B bushels from last month's 1.837B. Trade forecasts were for 1.739B. Production is lifted to 13.843B bushels from 13.763B last month and trade estimates of 13.641B. The average yield is expected at 155.3 bushels/acre vs. 123.4 last year.
Beans go green, however, as the USDA cuts it estimate for yields across the Midwest. The agency sees production at 3.149B bushels and ending stocks of 150M after cutting export demand by 20M bushels. "Leaves trade nervous," tweets Arlan Suderman of Water Street Solutions. "USDA too conservative on demand."
Wheat's reverses an early loss to go flat even as the USDA revises higher its forecast of ending stocks to 561M bushels from 551M.
Deere (DE -1.1%) got knee-jerked for a few cents on the news release, but looks to be in the process of bouncing back.
Corn (CORN -3.9%) crumbles after the USDA estimates farmers planted 97.379M acres - the most since 1936 and far ahead of estimates for just 95.431M acres. The number of acres to be harvested, however, fell to 89.135M from 89.5M projected 2 weeks ago, and stocks of 2.764B bushels are below expectations of 2.845B. Bean (SOYB -0.5%) acreage is estimated at about an inline 77.28M acres - the most ever. DBA -1%.
Corn (CORN -1.8%) gives up early gains and turns sharply lower after the USDA estimates 2013/14 ending stocks of 151.8M tons, above the trade estimate of 149.6M. The USDA cut its yield projection by 1.5 bushels to 156.5 bushels/acre, but lower feed usage and no reduction in planted acreage (despite spring delays) has stocks higher. Tyson (TSN +0.9%) and Pilgrim's Pride (PPC +1.9%) cheer the news. The data was bearish for beans (SOYB -1.8%) as well. Grains ETF (JJG -1.3%).
The price of corn sees little comfort from Morgan Stanley's estimate of planted acreage coming in at 93.5M acres, well below the USDA's 97.3M forecast. Wet weather has slowed fieldwork, says Morgan, also projecting production of 13.3B bushels vs. the USDA at 14.14B. That corn-planting got off to a slow start is hardly new news and the USDA will update planting figures later today. CORN -1.2%.
Don't say Goldman didn't warn you (I, II). Corn (CORN) prices fell Tuesday to multi-week lows after the Department of Agriculture reported a 43 percentage point increase from last week to this week in the amount of the corn crop planted, bringing the total to 71% compared to just 28% a week ago.
Goldman's Tuesday bear call on agricultural commodities has implications for Deere (DE -2.7%) which gets a downgrade to Sell from Neutral. Analyst Jerry Revich says "recovering commodity inventories point to lower U.S. farm income and capex." As recently bearishBarron's notes (channeling Wells Fargo's Andrew Casey) "as goes the North American corn crop, so goes DE's stock price." For their part, GS says only a "major weather shock" could keep corn crop (CORN +0.1%) prices "near their current levels." Price target: $85 from $98.
Agricultural commodity prices (DBA) could fall a big 13% over the next year, says Goldman, predicting bumper crops across the globe. With weak demand and a record South American harvest (CORN, SOYB, WEAT) already in the books, it would require a major weather shock in the U.S. to keep prices near current levels. Earlier: Deere tumbles as poor weather slows U.S. planting progress.
Nearly everyone's a winner today as it's not just stocks lit up bright green. Oil (USO +3.3%), gold (GLD +0.5%), silver (SLV +0.7%), and corn (CORN +1.8%), are all flying. Even bonds (TLT), which tumbled on the big dip in jobless claims, have returned back to flat. Notably lower is natural gas (UNG -6.3%), tumbling on an unexpected add to inventories and as spring finally seems to arrive in the States.
Speculators exited long commodity positions last week at the fastest pace since 2008, according to the CFTC. Of particular note is the quickest decline in agricultural holdings (DBA) ever, led by an exiting of corn (CORN) positions as the price dropped about $1/bushel.