Global Ag News for Sept 27.23
Green Diesel Under Pressure as US Supply Glut Crushes Margins
- Biofuel credit values have plummeted as diesel prices rose
- Pace of renewable diesel build-out has shown signs of slowdown
The push to ramp up US green diesel is facing a supply glut that threatens to shrink producer’s profits.
Biofuel credits used to track compliance with federal blending rules, known as renewable identification numbers, or RINs, tumbled below $1 for the first time since late 2020 and have tumbled 44% this year. That’s bad news for renewable-diesel makers who have pumped out more of the fuel than the government requires refiners to use. Renewable diesel is typically made from a vegetable oil such as soy and is chemically identical to its petroleum-based cousin.
Green-diesel manufacturers “are subject to lower margins,” said Bloomberg Intelligence analyst Brett Gibbs. “They don’t have the pricing power they previously had.”
It’s the latest blow to the push to ramp up US production of renewable diesel, heralded as the best solution to slash carbon emissions in the hard-to-electrify heavy road transport sector. Oil companies and grain-processing giants are looking to profit from selling the product into low-carbon energy markets, but a raft of recent setbacks has slowed plans to build-out capacity.
The drop in RIN prices is good news for crude refiners, which are obligated to either blend biofuel or purchase the credits. Along with the lower costs, tight global inventories of traditional diesel have sent prices up about 50% from June lows.
FUTURES & WEATHER
Wheat prices overnight are down 3/4 in SRW, down 1/2 in HRW, up 1/2 in HRS; Corn is up 1 3/4; Soybeans up 6 3/4; Soymeal up $2.80; Soyoil up 0.43.
For the week so far wheat prices are up 11 3/4 in SRW, up 1/2 in HRW, down 3 in HRS; Corn is up 6 1/4; Soybeans up 16 1/2; Soymeal up $10.20; Soyoil down 1.44.
For the month to date wheat prices are down 13 3/4 in SRW, down 17 1/4 in HRW, up 1/4 in HRS; Corn is up 3 1/4; Soybeans down 59 1/4; Soymeal down $8.50; Soyoil down 4.37.
Year-To-Date nearby futures are down 25.3% in SRW, down 19.8% in HRW, down 18.2% in HRS; Corn is down 28.7%; Soybeans down 13.6%; Soymeal down 16.9%; Soyoil down 7.2%.
Chinese Ag futures (NOV 23) Soybeans up 39 yuan; Soymeal up 4; Soyoil up 18; Palm oil up 26; Corn down 19 — Malaysian Palm is up 81. Malaysian palm oil prices overnight were up 81 ringgit (+2.19%) at 3773.
There were no changes in registrations. Registration total: 3,005 SRW Wheat contracts; 741 Oats; 4 Corn; 220 Soybeans; 67 Soyoil; 24 Soymeal; 402 HRW Wheat.
Preliminary changes in futures Open Interest as of September 26 were: SRW Wheat up 3,211 contracts, HRW Wheat up 588, Corn up 1,470, Soybeans up 5,761, Soymeal down 1,776, Soyoil down 10,767.
Northern Plains: A front will move in on Thursday and stall, producing scattered showers through the weekend and into next week. Recent and forecast rainfall may help the remaining areas of immature corn and soybeans, but is hampering the early harvest progress.
Central/Southern Plains: Drier weather should be in place most of the week, offering better conditions for harvest and winter wheat planting. Isolated showers may start developing Friday and continue into next week with a trough digging into the West. Showers would benefit winter wheat establishment where they occur, but soil moisture is still above-normal and showers are not critically important just yet.
Midwest: A cutoff low-pressure system created waves of showers and thunderstorms for the western half of the region over the weekend, being heavy in a lot of areas, which will help somewhat with the drought situation and limiting the fall of water levels on the river systems. The system will continue to slowly move east through the region this week, with some more limited areas of showers moving through. With how dry soils have been, delays to harvest and winter wheat planting will likely be short. Drier weather should develop by the end of the week and temperatures will continue to be above normal through next week, helping crops to mature.
Delta: Isolated showers moved through this weekend, but most areas stayed dry. Drier weather will continue for the next week, forcing crops to maturity and favoring harvest.
Brazil: A front in the south will be forced into central Brazil later this week and stall there, producing areas of showers that should be the start of the wet season, which would be on time. Planting conditions are very good outside of the state of Rio Grande do Sul, which has had issues with flooding.
Argentina: A front across the north produced some showers over the weekend and will continue to do so Tuesday before it lifts north. Southern areas also have some limited showers moving through Tuesday as well. An overall drier pattern will follow through the weekend which should promote planting, but soils are still in need of moisture coming off of last year’s historic drought. El Nino favors the country with better rainfall during the season, however, and another front will move through early-mid next week with the promise of more showers.
The player sheet for Sept. 26 had funds: net buyers of 500 contracts of SRW wheat, sellers of 2,000 corn, buyers of 1,500 soybeans, buyers of 2,000 soymeal, and buyers of 1,000 soyoil.
- WHEAT TENDER: Egypt’s state grains buyer, the General Authority for Supply Commodities (GASC), is seeking wheat in an international purchasing tender. The deadline for offers is Sept. 27. Offers should be submitted on a free-on-board basis, for at sight payment.
- WHEAT AND BARLEY PURCHASE: Tunisia’s state grains agency is believed to have purchased about 100,000 metric tons of soft wheat and 50,000 metric tons of animal feed barley to be sourced from optional origins in an international tender on Tuesday
- CORN PURCHASE: The Korea Feed Association (KFA) purchased an estimated 132,000 metric tons of animal feed corn in an international tender expected to be sourced from either South America or South Africa
- SOYMEAL PURCHASE: South Korea’s Major Feedmill Group (MFG) purchased an estimated 60,000 metric tons of soymeal in a private deal on Tuesday without an international tender being issued.
- CORN AND BARLEY TENDER: Algerian state agency ONAB issued international tenders to purchase around 90,000 metric tons of animal feed corn and 30,000 metric tons of feed barley
- CORN AND SOYMEAL TENDER: Iranian state-owned animal feed importer SLAL issued international tenders to purchase up to 180,000 tons of animal feed corn and 120,000 tons of soymeal.
- WHEAT TENDER: Bangladesh’s state grains buyer issued an international tender to purchase 50,000 metric tons of milling wheat.
- RICE TENDER: South Korea’s state-backed Agro-Fisheries & Food Trade Corp. has issued an international tender to purchase an estimated 50,100 metric tonnes of rice largely to be used from the United States
ETHANOL: US Weekly Production Survey Before EIA Report
Output and stockpile projections for the week ending Sept. 22 are based on seven analyst estimates compiled by Bloomberg.
- Production seen slightly higher than last week at 983k b/d
- Stockpile avg est. 21.479m bbl vs 21.681m a week ago
- The EIA in Washington is scheduled to release the report at 10:30am Wednesday
Canada Canola Crush at 829K Tons in August
Canola processing rose 31% in August from a year ago, according to Statistics Canada data released Tuesday on agency’s website.
- Oil production totaled 348k tons, and meal output at 492k tons
- NOTE: Marketing year begins Aug. 1
- NOTE: Canada is the world’s top canola grower
Brazil soy exports seen reaching 6.23 mln tns in September – Anec
- BRAZIL SOY EXPORTS SEEN REACHING 6.23 MILLION TNS IN SEPTEMBER VERSUS 3.58 MILLION TNS IN SAME MONTH A YEAR AGO- ANEC
- BRAZIL CORN EXPORTS SEEN REACHING 9.59 MILLION TNS IN SEPTEMBER VERSUS 6.84 TNS IN SAME MONTH A YEAR AGO- ANEC
- BRAZIL SOYMEAL EXPORTS SEEN REACHING 2.18 MLN TNS IN SEPTEMBER VS 1.75 MLN TNS IN SAME MONTH A YEAR AGO- ANEC
EU Soft-Wheat Exports Fall 27% in Season Through Sept. 24
The European Union’s soft-wheat exports in the season that began July 1 reached 6.88m tons as of Sept. 24, compared with 9.42m tons in a similar period a year earlier, the European Commission said on its website.
- Leading destinations include Morocco (1.29m tons), Nigeria (726k tons) and Algeria (472k tons)
- Barley exports are at 1.89m tons, down 16% y/y
- Corn imports are at 3.9m tons, down 41% y/y
Biofuel Credits Are Plummeting in the US in Boon for Refiners
Credits used to show compliance with the US federal biofuel mandates have plunged to their cheapest level since January 2021, cutting costs for US fuelmakers that don’t have ready supplies for blending.
- D4 RINs, credits generated from blending biodiesel or renewable diesel, have fallen to $1 per RIN; That’s down by 16% from a week ago and 37% from two months earlier: New Stone data
- Values have fallen due to cheap soybean oil, a main feedstock for biodiesel and renewable diesel
- Meanwhile, petroleum diesel costs have gone up due to tight global supplies
- This price difference between soybean oil and diesel futures incentivizes biofuel blending and drives down credit values
- Capacity growth for renewable diesel production has outstripped federal mandates: BI analyst Fernando Valle
- Overall compliance cost per gallon of fuel has fallen to ~$5.50, down from more than $8 last month, according to data complied by Bloomberg
- RIN costs apply to gasoline, road diesel consumed in the US
Ukraine’s Grain Exports Plunge More Than 50% in September
Ukraine’s grain exports declined to 1.75m ton this month from 3.67m tons that the country shipped a year ago, Agriculture Ministry says on its website.
- Exports fell 20% from the start of season on July 1 compared with last year as Russia pulled out of a deal that allowed grain exports via three Ukrainian ports on the Black Sea and attacked Ukrainian port facilities, including on the Danube river, on a regular basis
- Total of more than 6.34m tons includes:
- 2.6m tons of corn, down 42% from last year
- 3.16m tons of wheat, up 12%
- 603,000 tons of barley, down 10%
Brazil, Paraguay, Argentina grains producers say EU ban will disrupt trade
Grains producers in Brazil, Paraguay and Argentina published on Tuesday a manifest criticizing the European Union’s anti-deforestation rules which, according to them, will disrupt grains trade across the globe.
Several months ago, the European Union passed rules banning the purchase of products linked with deforestation after December 2020, a move seen as “protectionism” by the South American food producers.
The EU rules took force in June and companies have 18 months to adapt.
According to the manifest signed by soybean, soymeal and corn producers of the three nations, the measures in the EU Deforestation Regulation (EUDR) affects the “sovereignty” and “increase risks” for companies and food suppliers.
“The (EU decision) is a trade barrier disguised as an environmental measure that will bring considerable impacts on the cost of production, increase in food prices and will cause distortion of world trade,” the food growers said in the manifest.
Brazil, Paraguay and Argentina are responsible for 51.3% of soybeans and 15.2% of corn produced in the world, according to the manifest.
The criticism coincides with talks to finalize a comprehensive trade agreement between Mercosur, the South American trade bloc, and EU nations.
The EU and the Mercosur completed negotiations in 2019 but the deal has been on hold due to concerns about Brazil’s commitment to climate action.
The European Commission did not immediately respond to a request for comment.
India Sets Target to Produce Record Food Grains in 2023-24
The country has set a target to produce 332m tons of food grains in 2023-24, Food Secretary Manoj Ahuja said at an event in New Delhi on Tuesday.
- The target includes 161.2m tons for winter-sown crops
- India aims all-time high lentils output of 29.2m tons, including 18.1m tons in the winter season that begins in October and November
- Target for record oilseeds production set at 44m tons, including 14.5m tons for winter-sown crops
- In 2022-23, India is estimated to produce 333.5m tons of food grains, 27.5m tons of pulses and 41m tons pf oilseeds, according to the farm ministry’s third advanced estimate
Canada to Scrutinize Bunge-Viterra Deal Over Port Concerns
- Review will assess transportation impact on Canadian farmers
- Bunge, Viterra hold ownership interests in port terminals
Bunge Ltd.’s proposal to acquire Glencore-backed Viterra will undergo a public review in Canada, including with members of the port and marine industry, to ensure fair transportation pricing and access.
The $8.2 billion deal poised to create an agricultural trading giant is of “significant national interest in Canada’s transportation sector and the broader supply chain” as both companies hold ownership interests in port terminals throughout our country, the nation’s Minister of Transport Pablo Rodriguez said in a statement.
The transaction will be scrutinized under the mergers and acquisitions provisions of the Canada Transportation Act and has a completion deadline of June 2. “Healthy competition in the transportation sector is necessary to ensure fair pricing and access for users, especially for Canadian farmers,” the minister wrote.
Bunge shares slid 1.5% as of 3:04 p.m. in New York.
Indonesia Plans More Rice Imports to Anticipate EL Nino
The nation plans to import an additional 1m tons of rice this year and another 1m tons in 2024, Coordinating Minister for Investment and Maritime Affairs Luhut Panjaitan says in a speech in Jakarta.
A number of countries have made some offers, he says, declining to name them.
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