Cash premiums for corn and soybeans shipped to export terminals near New Orleans this month increased against futures on speculation that government tax credits will boost demand for fuel made from the crops.
The spot-basis bid, or premium, for soybeans delivered in November rose to 77 cents to 81 cents a bushel above January futures, compared with 74 cents to 78 cents yesterday, U.S. Department of Agriculture data show. Corn premiums were 46 cents to 47 cents a bushel above March futures, up from 39 cents to 46 cents a day earlier, the agency said.
“There’s a more optimistic outlook for government credits to be extended for blending biofuels next year,” said Roy Huckabay, an executive vice president at the Linn Group in Chicago.
Soybean futures for January delivery rose 20.5 cents, or 1.6 percent, to close at $13.0025 a bushel on the Chicago Board of Trade. The most-active futures gained 5 percent this week, the biggest rally since mid-October. Earlier, the price reached $13.015, the highest since Nov. 15.
Corn futures for March delivery rose 18 cents, or 3.2 percent, to close at $5.735 a bushel on the CBOT. The price added 3.7 percent this week, a second straight gain. Earlier, the grain touched $5.74, the highest since Nov. 15.
Government incentives for the ethanol and biodiesel industry may be extended for one year under a bill by U.S. Senator Max Baucus that is set for a vote tomorrow, Huckabay said.
The tax credit for each gallon of ethanol blended with gasoline would be cut to 36 cents from 45 cents under the bill introduced by Baucus, a Democrat from Montana and chairman of the Finance Committee. A 54-cent tariff levied on Brazilian imports would also remain in place for a year.
A $1-a-gallon incentive for biodiesel, which expired last year, would also be extended for 12 months under Baucus’s bill.
“Exporters are going after supplies because they are concerned fuel production will increase next year,” reducing inventories available for shipment overseas, Huckabay said.