Much of the attention in the ethanol fuel industry in the last few months has been on the end of the Volumetric Ethanol Excise Tax Credit (VEETC), commonly referred to as the blender’s credit, on December 31, 2011. Certainly, the ethanol industry did ramp up production heading into the end of the year as it sought to capture as many credits as possible.

The release of the February World Agricultural Supply and Demand Estimates (WASDE) last Thursday prompted less market reaction than the release of the January WASDE report.  Recall that last month’s report garnered a limit down move that was subsequently followed by a nearly 100% price retracement.

Live cattle prices in January were better than expected, rallying more than more than $5/cwt from the first to the third week of January.  During that same time period, Choice boxed beef prices dropped nearly $10/cwt, while beef byproduct values were relatively constant.  The result of these price changes was a dramatic reduction in beef packing margins, which will likely weigh on live cattle prices in weeks and months to come.

The nearby March corn futures contract staged a fairly impressive rally last week, gaining $0.30¼.  Lingering concerns about South American drought, strong export sales, and commercial and fund buying all provided support to the corn market.  Interestingly, though, one of the factors that has been quite supportive to the corn market is the lack of producer selling.  In particular, this has helped to strengthen basis by 5 to 10 cents, or more, in many Midwest markets.