Though Thanksgiving isn’t until this week, the grain markets took on a holiday-type feel last week with trade. It’s apparent a range has been established, and with harvest wrapping up and no major influx of news expected, many traders are looking to outside markets to take advantage of volatility.

At this point the only thing that could really generate excitement would be a resolution to the trade war we find ourselves in with China. It appears as though high-level officials are doing all they can to make the meeting between President Trump and President Xi at the end of the month successful.

Reports surfaced mid-week that Chinese officials had answered the list of demands presented by the United States in writing, and that further outlines were being established ahead of the high-level chats. While certain members of the administration have been quick to extinguish too much excitement over the progress we’ve seen, others have stated they are confident a resolution will be reached shortly.

Outside of the Chinese news, we have been watching what is taking place in crude. In six short weeks the crude market has managed to erase all of 2018’s gains, falling to the lowest level in a year. Ideas that Saudi Arabia will fight OPEC’s pledged cuts and record U.S. production are just two of the factors playing in to the sharp sell-off.

What is most unfortunate is the impact that the drop in oil and gas prices is having on already poor ethanol margins. Though the relationship between crude and corn was nearly nonexistent when crude was trading higher, a drop in crude prices puts pressure on the value of corn, as the relationship between corn and energy prices as a whole cannot be denied.

As we’ve discussed before, ethanol margins have been rocked with the gutting of the RINs market via refinery exemptions given by the EPA, as well as the administration’s push to change how RINs are traded as a whole. Since RIN values were used in the past to offset poor grind margins, the fact they are nearly worthless now is showing itself in margins.

In the last month or two we have heard of several ethanol plants shutting down, being sold or cutting back on production until margins improve.

Also troubling ethanol players and corn buyers is the idea that not only has year-round E15 use been contested and is likely facing a lengthy legal battle, but that the cheaper gas gets, the less attractive cheap octane via ethanol becomes.

While the Renewable Fuel Standard mandated 10 percent blending, a slight increase above that blend is allowed – but only takes place when it is attractive from a pricing standpoint to do so. In theory, the cheaper the price of gas, the higher the blend wall becomes.

Though production was stout last week, it is likely that until we find a new outlet for ethanol production via increased domestic use or exports, margins will continue to languish, pressuring the overall demand outlook and values ethanol players can or will pay.

While the environment for ethanol grind might be poor, soybean crushers found themselves crushing a record amount of beans in October. NOPA crush released last Thursday showed 172.3 million bushels crushed, coming in higher than lofty pre-report guesses and well above levels seen a year ago.

Through the first two months of the marketing year crush levels are running 11 percent above year-ago levels, with the USDA forecasting a 1.2 percent increase. While crush margins have fallen off significantly from recent highs, they are still strong enough to support continued swift demand in the months ahead.

Export sales released on Friday were in range, but not overly exciting. One point of interest: We saw “unknown” come in and make daily purchases of soybeans three days last week. This is a relatively new development, as flash sales have been nearly nonexistent, it seems, for the start of the marketing year.

In the past “unknown” has always been thought of as China; whether this is an indication trade talks are actually making headway or not will remain to be seen until shipment.

This week will be shortened by the holiday, with likely much thinner trade than normal. Thin trade tends to mean an increase in volatility, so be aware without a major fundamental shift, major moves in either direction will be short-lived. Most of trade attention will remain rightfully focused on China news.

Angie Setzer is the Vice President of Grain for Citizens Elevator in Charlotte, Mich. Her market commentary can be found on Twitter by @GoddessofGrain and online at www.citizenselevator.com

The opinions and views in this commentary are solely those of Angie Setzer. Data used for this commentary obtained from various sources are believed to be accurate.