Nearby December corn futures prices sank to contract and new three-year lows Monday on blows from the home front and the export market. The U.S. Environmental Protection Agency on Nov. 15 proposed reducing the 2014 ethanol mandate, which may reduce domestic corn demand. On Nov. 18 trade reports confirmed China had rejected an import cargo of unapproved bioengineered U.S. corn.

CME Group corn futures in Chicago declined five consecutive trading sessions beginning Nov. 12, with the largest losses of about 8@10c a bu seen Nov. 18. The nearby December contract sank to $4.10¾ a bu early Nov. 19 but was trading flat to slightly higher later in the morning with some suggesting the market was oversold and recent price declines may encourage buying. Corn futures prices had been under pressure as the harvest of a record large U.S. corn crop advanced, although the latest U.S. Department of Agriculture estimate of 13,989 million bus was slightly below trade expectations. The crop was 91% harvested as of Nov. 17, the U.S.D.A. said.

A report on Reuters confirmed China had rejected a 55,000- to 60,000-tonne shipment of U.S. corn that tested for Syngenta AG’s Agrisure Vipteracom, also known as MIR 162, a strain China had not yet approved for import. But the report also indicated trade sources thought the rejection would have minimal long-term impact in shipments of U.S. corn because China was expected to approve the strain shortly, and it already was approved for export to Japan, the European Union and Mexico. China currently allows the import of 25 different bioengineered strains of corn. The shipment, which already had been unloaded, was reloaded and may have been shipped to Japan or South Korea, according to trade reports.

In addition to expectations that the bioengineered strain will be approved soon, market conditions make it likely there will not be a major disruption in exports of U.S. corn to China, according to trade sources. Strong demand for corn in China has pushed prices to record highs. Net export sales of U.S. corn to China totaled 3,375,400 tonnes for the 2013-14 marketing year to date (Sept. 1 to Nov. 7), compared with 183,800 tonnes during the same period a year earlier, the U.S.D.A. said in its latest weekly export sales report. Actual shipments for the current marketing year were 1,471,300 tonnes, compared with 836,800 tonnes during the same time last year, the U.S.D.A. said. 

On Nov. 15 the E.P.A. said it would propose reducing the 2014 mandate for blending corn-based ethanol to between 12.7 billion and 13.2 billion gallons, down from the current mandate for next year of 14.4 billion gallons. The reduction would equal about 500 million bus less corn used to make ethanol (1 bu of corn produces about 2.8 gallons of ethanol). The U.S.D.A. in its Nov. 8 World Agricultural Supply and Demand Estimates projected 4,900 million bus of corn would go into ethanol production in 2013-14 (September-August).

But some analysts also suggested the lower ethanol mandate may have less of an impact on corn demand than indicated by the market’s reaction. They noted that recent low corn prices have spurred ethanol production as margins have improved to at least $1 a gallon. Several ethanol facilities that were mothballed for months have been brought back into production the past couple of months. Should margins remain strong, ethanol production and thus corn demand would remain strong with excess ethanol output likely to be targeted for export, they said.