Corn commercial positions

Maintenance margin corn

Due to the record corn harvest, corn prices have fallen to the $4.20 per bushel mark which has improved profit margins for ethanol producers and spurred some closed plants to come back online. Reuters reported this week, for example, that Cargill is opening a plant in Fort Dodge, IA that it had purchased from Tate & Lyle in 2011. The plant had been idled. Reuters also reported that Noble Group Ltd. is expecting to restart a plant in Indiana. Another facility in Ohio also came back online in October.

When times are good, the ethanol industry has historically expanded production which increases both corn and ethanol supplies, says Bruce Babcock, agricultural economist, Iowa State University. This can lead to market fluctuations that can actually reduce margins, he adds.

Asked about how current ethanol margins could impact the consumption of E15, Babcock said that future sales of E15 as well as E85 would likely be determined more by whether the EPA cuts the 2014 volume requirements for ethanol blends. On October 30, Reuters also had reported on a leaked EPA proposal that would significantly reduce ethanol blending volumes. If volume requirements are reduced, petroleum refiners would feel no pressure to blend beyond the E10 level, and ethanol producers would then export higher blends, Babcock says. Wally Tyner, agricultural economist, Purdue University, adds, “Prospects are not that great for expansion of E15 because it is dependent on retail stations, of which there are very few. There is more potential for expanding E85 since ethanol is now about 75 cents per gallon less than wholesale gasoline.”

Retail prices for regular unleaded gas, however, are also lower and are expected to remain so for the rest of the calendar year. “I expect regular gas to range between $3 and $3.40 in this region for the rest of the year, ” says Purdue’s Tyner. “That does not include non-attainment cities like Chicago.”

Tyner adds, “Prices will remain volatile as refineries are holding lower inventories, and when there is a maintenance issue, there will be spikes. However, both crude and gasoline inventories are higher than normal (the new normal), so that should put some downward pressure on pump prices.”

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Popular Q&A

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What are the margin requirements for commodity trading?

A person at Scottrade told me that you must have 1 million dollars in a margin account to trade commodities. Was he blowing smoke somewhere, or is this correct?

He's blowing smoke big time.
Most traders start with $10,000.
Margin is determined by the contract you want to trade.
Oil margin currently is around $10,000 per contract.
Corn is around 3,000.
If you really want to learn how to trade commodities from a 35 year veteran I suggest you go to
The guy know what he's talking about and trades commodities the way they should be traded. (so you can sleep at night)

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What is a margin in commodities trading?

A margin in commodities trading, is the amount of money you have to deposit in your brokerage account before trading a futures contract. The margin amount varies on each commodity and fluctuates with the volatility of the markets.
There is an initial margin amount required when entering a contract and "maintenance" margin amount that must be kept in the account at all times during the contract holding period, which is typically lower than the initial margin.
The balance of your account will fluctuate with gains and losses on the contract and if the balance falls below the "maintenance m…

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