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OCT 14, 2013
While the lack of reports is leaving us blind about what’s going on across the country, business continues to be done and milk prices see another good month.
The government’s inability to agree on a budget is becoming more ridiculous. The politics involved in this whole situation are making the U.S the laughing stock of the world. Here we are, a democracy with elected officials who cannot work together and come up with a solution for the good of the nation. It is all tied up with party lines, special interest and the positioning for the next election.
Many citizens are furloughed, which is having a growing impact on various areas of the economy. Some goods and services are not being taken care of as usual. Imports and exports of various items and materials are virtually non-existent, resulting in increasing backlogs at shipyards. This has trickled down through many areas of the economy, not only here but the world. This is something that will not be cleared up overnight once a budget is finally adopted.
So far, there is little indication that exports of dairy products have been affected. It is difficult to get an accurate picture of this due to the inability of receiving government reports. If there are no factors that could hinder export demand of dairy products, the hindrance could come from the inability to ship it out as usual. The U.S. does not send a whole boat load of cheese or butter to one place. Products get put on a cargo ship along with other goods. If shipping to a particular country is slower due to reduced inspectors, which could slow the gathering of a full load, it will eventually slow all export movement. However, much of what is purchased for exports generally has a window of shipping time. When CWT agrees to assist in the exports of cheese and butter, it is generally states that it will be shipped over the duration of the next four to six months.
One issue within the dairy industry is the lack of reports. We have now plowed our way through half of the month of October without the value of any USDA reports. This leaves us blind as to what is going on across the country. Surveys are not being conducted, weekly regional reports are not being released, monthly reports are not being released, etc. Fortunately, the Federal Orders are keeping track of and releasing the weekly National Dairy Product Sales report, providing the industry with critical information for product pricing.
With all of this lack of information, business still needs to be done — and continues to be done. Trading on the CME spot market has been active, giving traders something to base their trading activity and price direction on. The recent strength in cheese prices has certainly been welcomed as it supports another good month of milk prices. Most of the pricing for October has already been factored in by the trade, with the October futures contract settling into a sideways narrow trading pattern. November will be susceptible to an underlying cash price movement over the next month, making it difficult to predict where milk prices will be. But we do know the current milk/feed ratio is the best it has been since November 2011, and one can only hope the ratio will improve as time moves forward.
Lower corn prices due to better-than-expected yields may translate over into lower milk prices if the historical pattern is followed. Milk production has remained fairly strong despite high grain prices, so one has to wonder how far dairy farmers will push production We generally increase milk production when milk prices are low to make up for the lower prices and generally increase milk production when feed is less expensive and profitability has improved.
OCTOBER 10, 2013
The U.S. Environmental Protection Agency is considering scaling back legal requirements on the use of ethanol next year amid complaints from refiners that statutory mandates would exceed their ability to blend it into fuels without putting engines at risk.
One proposal the agency is considering would mandate 15.22 billion gallons of renewable fuels in 2014 instead of the 18.15 billion gallons established by a 2007 law. The agency may call for the use of 13 billion gallons of conventional corn-based ethanol and 1.28 billion gallons of biodiesel, according to a person who saw the proposal who asked not to be identified because the EPA hasn’t issued it.
The administration of President Barack Obama, which has the ability under the law to adjust some of the legal requirements, could revamp the plan before the EPA issues it in the coming weeks. After that, the proposal could be changed before being finalized by the agency. This proposal was previously reported by Greenwire.
Under the Renewable Fuel Standard, refiners such as Exxon Mobil Corp. must use a certain amount of those fuels each year, with their target determined by their share of the fuel market. The EPA and renewable-fuel makers argue it spurs production of domestic fuels and cuts greenhouse-gas emissions by reducing use of gasoline or diesel.
The EPA is also considering dropping the requirement for cellulosic fuels to just 23 million gallons from 1.75 billion gallons as required in the law, as production of fuels made from scrap wood or corn husks has failed to grow as expected, according to the person familiar with the proposal.
The 2007 law mandates the use of 14.4 billion gallons of corn-derived ethanol in 2014 and 15 billion in 2015. Lobbyists for refiners such as Valero Corp. say that requirement is too high, and have pressed both Congress to scrap the entire program and EPA to lower the requirements.
Oil industry proponents have said that the escalating requirements of ethanol to be added would force them to sell fuel blends exceeding 10 percent or export gasoline, a phenomenon known as “hitting the blend wall.”
Blending in ethanol at greater than 10 percent can cause problems with engine materials breaking down and the operation of emission-control systems, according to the American Petroleum Institute. Older vehicles can’t handle blends of 15 percent ethanol, the Washington-based trade group said.
The EPA had already pledged to adjust the quotas for falling demand for gasoline, and this proposal shows how they may be considering doing that. Based on the Energy Information Administration’s estimated 132.9 billion gallons of gasoline demand in 2014, an ethanol requirement of 13 billion gallons would fall below that 10 percent share.
Still, supporters of the Renewable Fuel Standard, or RFS, indicated today that they are contemplating legal action if this plan is carried out.
Existing vehicles that can use fuels with 85 percent ethanol and new filling stations using 15 percent ethanol could allow for the sale of 14.4 billion gallons of ethanol in 2014, said Bob Dinneen, president of the Renewable Fuels Association.
“The oil industry has argued that the existing vehicle fleet and current refueling infrastructure are incapable of absorbing significant volumes of ethanol above the E10 ‘blend wall,’ ” Dinneen, whose group is based in Washington, wrote in a blog post today. “This contention is completely false.”
“We believe it would be unlawful for EPA to waive the RFS based on the ‘blend wall,’ ” he added.
The proposed requirement for biodiesel and advanced biofuels also doesn’t make sense, said Anne Steckel, vice president for federal affairs at the National Biodiesel Board.
“We’re not sure where these numbers are coming from, and it may just be wishful thinking among folks in the oil industry,” she said in a statement.