News

OCTOBER 10, 2013
By: Bloomberg

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.
Corn Husks
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.

Fuel Standard
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 […]

SEPTEMBER 18, 2013
By: Bloomberg

U.S. farmers who were prevented from planting by rain this year filed crop-insurance claims on six times more land than last season, the government said.
Farmers filed claims on 8.213 million acres of grains, oilseeds, cotton and sugar as of Sept. 1, according to revised estimates released today by the U.S. Department of Agriculture’s Farm Service Agency. That compares with 7.71 million acres at the beginning of August and last year’s total of 1.239 million acres. The FSA is set to update its data monthly through January, with its next report on Oct. 16.
Parts of the Midwest, including top corn and soybean growers Iowa and Illinois, saw double the normal amount of rain in April and May, when farmers usually sow crops, National Weather Service data show. Farmers planted a total of 246.3 million acres enrolled in government programs, including failed acreage, down from 250.76 million a year earlier, the FSA said.
“Some parts of the Corn Belt have been hit by weather problems throughout the season,” said Kieran Walsh, a broker of agricultural derivatives at Aurel BCG in Paris. “Delayed plantings and the higher number make sense.”
Crop prices rallied today on the Chicago Board of Trade as corn for delivery in December rose as much as 2.6 percent to $4.685 a bushel and soybeans for delivery in November added as much as 1.2 percent to $13.65 a bushel. Corn is still down 45 percent since reaching a record $8.49 a bushel last year as drought slashed U.S. yields, while soybeans slumped 24 percent from last year’s all-time high of $17.89 a bushel.
Corn Harvest
Crop-insurance claims covered 3.57 million acres of corn as of Sept. 1, up from 3.41 million in August and from last year’s total of 262,467 acres, the FSA said. The USDA said Sept. 12 farmers might harvest a record 13.843 billion bushels of the grain, more than previously estimated, as yields recover from last year’s drought.
Soybean claims were filed on 1.69 million acres, compared with 1.62 million in August and 159,579 acres last year, according to the report. The U.S. harvest may total 3.149 billion bushels, less than expected in August while still 4.4 percent more than last year.
Farmers filed crop-insurance claims on 1.98 million acres of wheat, up from 1.74 million in August, while rice claims at 418,021 acres rose from 408,737 acres a month earlier, the FSA said. Claims for upland cotton increased to 205,410 acres from 197,116 acres, according to the report.

JULY 23, 2013
By: Ed Clark, Top Producer Business and Issues Editor

The debate about the future of biofuels mandates is running hot and heavy in Congress with the outcome too close to call. What would be the impact on corn prices if the ethanol mandate were wiped out entirely?
Not great, so far as current ethanol use is concerned, says Bruce Babcock, Iowa State University ag economist.

(Click to read: What Farmers Need From Biofuels Policy in 2014)

“The mandate increases corn prices by about 25¢ per bushel,” Babcock says. He spoke July 17 at the Federal Reserve Bank of Kansas City’s Agricultural Symposium. “The impact of policy mandates on 2013/14 producer profitability is modest,” he says. This year’s Renewable Fuels Standard (RFS) mandate is 13.8 billion gallons of ethanol, increasing to 14.4 billion gallons next year, and 15 billion gallons by 2015. A 15 billion gallon mandate has only a modest increase on corn prices as well, in Babcock’s view.
His outlook assumes favorable weather now through 2014/15, thus big crops and much lower corn prices than this year, potentially reaching sub-$4 levels for 2014/15.
“Without a 2014 drop in acreage, stocks could grow to 2.5 billion bushels,” he says. That would represent a tripling in stocks from the current 2012/13 marketing year. Obviously, with or without a mandate, continued ethanol demand is important.
What gives and why does he believe the mandate would only have a minor impact on corn prices and ethanol demand?
“If you didn’t have the mandate, ethanol would still be 9% to 10% of the nation’s fuel supply,” Babcock says. While oil companies did not welcome the mandate in the RFS, they found themselves making money by using ethanol as a cost-effective octane booster, taking lower octane petroleum and increasing it to required octane levels for ultimate sale, he says.
Ironically, at the same time oil companies are fighting the ethanol industry over higher blends in the future, ethanol is making them money today. “Since it’s profitable for oil companies to use ethanol, I assume that even without a mandate, they would continue to be rational when it comes to buying it,” Babcock says.
Still, there are two variables that could, without a mandate, cause lower ethanol use. “If gasoline prices—caused by a major decline in crude oil prices—drop precipitously, then mandates have a larger impact,” Babcock says.
If weather conditions are unfavorable and moves corn prices higher, mandates will boost corn prices by more than under unfavorable weather, he adds.
Eliminating the mandates would have another impact, Babcock says. The value of RINs, or ethanol production credits, that oil companies purchase to meet the mandate, currently are valued at $1.35 per gallon. Without the mandate, the RIN price would fall to zero, Babcock says. Even with a mandate, he sees RIN prices declining.
Babcock says that without question, the mandates contained in the RFS have been important in creating 3 billion bushels in additional annual corn demand, or net 2.25 billion bushels, factoring in distillers dried grains.
Corn ethanol production has increased by 8.5 billion gallons […]