Energy bust threatens farmer earnings
Debt-laden farmers face a collapsing energy market that threatens to stunt corn demand and overall revenue after weathering last season's historic flooding and a trade war.
Plunging oil prices and waning gasoline demand during the last two weeks have further crunched ethanol production margins, forcing many manufacturers to idle operations or curtail production during the last two weeks — eroding near-term corn demand.
About 20pc of ethanol plants in the US have idled and another 40-50 facilities curbed output, according to the Renewable Fuels Association.
Between 400mn-500mn bushels of corn may not be consumed if the cuts in ethanol production stretch through May, according to INTL FCStone risk management consultant Jake Moline, amounting to $1.52bn-1.9bn in lost revenue based on the US Department of Agriculture's (USDA) average farm price in March.
Farmers will likely re-evaluate crop mixes for this season when faced with potential revenue losses of this magnitude but this is unlikely to be reflected in the USDA's acreage forecast tomorrow, Moline added.
"If you are unsure if that ethanol plant will be running, you are then scratching your head whether or not you are going to plant corn," Moline said.
The US ethanol industry consumes about 38-40pc of domestic corn production, according to the US Department of Agriculture (USDA), and has supported the US as a global leader in corn output since 2007.
The massive expansion of biofuel production in the US — kickstarted by the Energy Independence and Security Act of 2007 — bolstered farmer earnings and fueled growth in the agricultural sector as the nation slipped into the Great Recession.
The timing of the recession "came in during a period right when farm income was taking off, and then it kept going to about 2013," USDA senior economist Carrie Litkowski said.
But as the energy sector shielded the nation's corn sector from a recession 10-12 years ago, it is primed to capsize at-risk farmers still recovering from last season's flooding and the now de-escalating trade war with China.
Farmer debt this year is forecast to balloon to an all-time high of $425.3bn, according to the USDA, while bankruptcy cases continue to amass in the US heartland.
Chapter 12 filings — a form of reorganization specifically for farmers — rose to a new high at 580 cases during the 2019 government fiscal year, which runs from October to September, according to US federal courts data.
President Donald Trump has aimed to keep farmers afloat through subsidies. The Trump administration last year approved the highest amount of federal aid since 2005 after severe rains caused flooding and delayed planting, while the trade war with China severed a major, long-established destination market for soybean growers.
Farmers this year are set to receive another $23.5bn of direct federal assistance after Trump on 27 March signed the massive $2 trillion stimulus package geared to provide economic relief to various industries from the coronavirus disruption.
"We are going to keep our small businesses strong and our big businesses strong," Trump said during the signing ceremony. "And that is keeping our country strong and our jobs strong."
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Q&A:Shipping needs cultural shift to decarbonise: Total
Q&A:Shipping needs cultural shift to decarbonise: Total
Amsterdam, 20 May (Argus) — A cultural change in buying behaviour and supply patterns is necessary for the shipping sector to meet its decarbonisation targets and may be the biggest hurdle to overcome, strategy and projects director for TotalEnergies' marine fuels division Frederic Meyer told Argus. Edited highlights follow: What is the biggest challenge standing in the way of the maritime industry in meeting decarbonisation targets and the fuel transition ? A cultural change is required — for decades the maritime sector has relied on by-products with high energy density from the crude refining process such as fuel oil. The industry will now have to pivot its attention towards fuels developed for the purpose of consumption within the maritime industry. This will also require time as the sector looks to level up, and it remains to be seen whether there will be enough time to meet the International Maritime Organisation (IMO)'s net-zero by or around 2050 targets. But we have seen some good progress from cargo owners who are seeking scope 3 emissions related documents. How does TotalEnergies see marine biodiesel demand moving in the short term? In the short term, there is little incentive for the majority of buyers in the market. This is due to a lack of any regulatory mandates, as well as limited impact from existing regulations such as the IMO's carbon intensity indicator (CII) and the EU's Emissions Trading System (ETS). Despite providing a zero emission factor incentive for biofuels meeting the sustainability criteria under the EU's Renewable Energy Directive (RED), EU ETS is still on a staggered implementation basis beginning with only 40pc this year, rising to 70pc next year and 100pc in 2026. Further, EU ETS prices have been quite low, which also weighed on financial incentives for marine biodiesel. Therefore, many buyers are currently waiting for further incentives and signals from the regulators before purchasing marine biodiesel blends. Another point impacting demand is the current edition of ISO 8217, which does not provide much flexibility when it comes to marine biodiesel blend percentages and specifications. The new 2024 edition will likely provide greater flexibility for blending percentages, as well as a provision for biodiesel that does not meet EN14214 specifications. This will provide greater flexibility from a supply point of view. However, there remains stable demand from buyers who can pass on the extra costs to their customers. And how do you see this demand fluctuating in the medium to long term? If the other alternative marine fuels, such as ammonia and methanol, that are currently being discussed do not develop at the speed necessary to meet the decarbonisation targets, then marine biodiesel demand will likely be firm. Many in the market have voiced concerns regarding biofuel feedstock competition between marine and aviation, ahead of the implementation of sustainable aviation fuel (SAF) mandates in Europe starting next year. With Argus assessments for SAF at much higher levels than marine biodiesel blends, do you think common feedstocks such as used cooking oil (UCO) will get pulled away from maritime and into aviation? With regards to competition among different industries for the same biofuel feedstock, suppliers may channel their feedstock towards aviation fuels due to the higher non-compliance penalties associated with SAF regulations as opposed to those in marine, which would incentivise greater demand for SAF. An area that can be explored for marine is the by-product when producing SAF, which can amount to up to 30pc of the fuel output. This could potentially feed into a marine biodiesel supply pool. So it's not necessarily the case that the two sectors will battle over the same feedstock if process synergies can be found. Regarding fuel specifications, market participants have told Argus that the lack of a marine-specific fuel standard for alternatives such as marine biodiesel is feeding into uncertainty for buyers who may not be as familiar with biofuels. What impact could this have on demand for marine biodiesel blends from your point of view? Currently, mainstream biodiesel specifications in marine biodiesel blends are derived from other markets such as the EN14214 specification from road diesel engines. But given the large flexibility of a marine engine, there is room to test and try different things. For "unconventional" biofuels that do not meet those road specifications, there needs to be a testing process accompanied by proof of results that showcase its safety for combustion within a marine engine. Some companies may not have the means or capacity to test their biodiesel before taking it into the market. But TotalEnergies always ensures that there are no engine-related issues from fuel combustion. Suppliers need to enact the necessary testing and take on the burden, as cutting out this process may create a negative perception for the product more generally. Traders should also take on some of the burden and test their fuels to ensure they are fully compatible with the engine. With many regulations being discussed, how do you see the risk of regulatory clashes impacting the industry? The simple solution would be an electronic register to trace the chain of custody. In the French markets, often times the proof of sustainability (PoS) papers are stored onto an electronic database once they are retired to the relevant authority. This database is then accessible and viewable by the buyer, and the supplier could also further deliver a "sustainability information letter" which mirrors the details found in the PoS. It is important for the maritime sector to adopt an electronically traceable system. What role could other types of fuels such as pyrolysis oil potentially play in the maritime sector's decarbonisation targets? We have teams in research and development at TotalEnergies which are studying the potential use of other molecules, including but not limited to pyrolysis oil, for usage in the maritime sector. It may become an alternative option to avoid industry clashes, as pyrolysis oil would not be an attractive option to the aviation sector. We are currently exploring tyre-based pyrolysis oil, but have only started doing so recently so it remains an untapped resource. We need to figure out the correct purification and distillation process to ensure compatibility with marine engines. For the time being we are specifically looking at tyre-based pyrolysis oil and not plastic-based, but we may look at the latter in a later stage. The fuel would also have to meet the RED criteria of a 65-70pc greenhouse gas (GHG) reduction compared with conventional fossil fuels, so we are still exploring whether this can be achieved. By Hussein Al-Khalisy Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Australia’s cropping conditions mixed: GPA
Australia’s cropping conditions mixed: GPA
Sydney, 20 May (Argus) — Australia's cropping regions show an imbalance as the winter crop planting period progresses, according to the Grain Producers Australia (GPA) latest 2024 season update. The report, which collected perspectives from GPA representatives in different cropping regions, revealed how dryness in Western Australia (WA) and Southern Australia (SA) is in contrast to favourable soil moisture and rainfall levels in the east Australia cropping regions of Queensland, New South Wales (NSW) and Victoria. WA growers are continuing to dry sow crops awaiting a significant rainfall event or "break" to germinate their crops. While some rain had fallen in May, most of the WA grain belt remains dry. Planting decisions in WA were influenced by the lack of rainfall, anticipated yields and future prices, according to the GPA report. Some growers are considering reducing their canola crop as the future price per tonne was unappealing, while others had already cut back their intended crop because of a dry rainfall outlook until June and the cost of canola seed. Others have withheld canola planting as they wait for a material seasonal break. These perspectives are consistent with the Grain Industry Association of Western Australia's May crop report that projected canola area in 2024 would be down overall from 2023 because of dry conditions. The GPA report also stated anxiety among WA growers were heightened because of a relatively poor season last year, along with the ability of some growers to diversify income streams with a government decision to ban live sheep exports by May 2028. Northern and central western NSW had good rainfall and a positive start to the season, while growers in southern NSW were looking for rain to germinate dry sown crops. Victoria has good soil moisture for seeding, although one GPA member said access to some fertilisers was an issue for growers who wanted it on hand for winter. Queensland has had wet weather for its summer crop harvest. The sorghum harvest period, usually finished during February–March, according to GPA, was disrupted by heavy rainfall around Easter. This reduced crop quality and could potentially delay winter crop planting, according to a GPA member. The US Department of Agriculture crop calendar for Queensland indicates the typical planting period for winter crops of barley and wheat is May and April-July respectively. By Edward Dunlop Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Japanese bank Mizuho boosts support for H2, ammonia
Japanese bank Mizuho boosts support for H2, ammonia
Tokyo, 17 May (Argus) — Japanese bank Mizuho Financial aims to provide ¥2 trillion ($12.8bn) in financial support for domestic and overseas cleaner fuel projects by 2030 to support Japan's plan to build a hydrogen supply chain. Private-sector Mizuho is offering financing to low-carbon hydrogen, ammonia and e-methane projects related to production, import, distribution and development of hydrogen carriers. Mizuho said it has in the past offered project financing for large-scale overseas low-carbon hydrogen and ammonia manufacturing projects, as well as transition loans. Japan is focusing on cleaner fuel use in the power sector and hard-to-abate industries, as part of its drive to reach net zero CO2 emissions by 2050. Japanese firms are getting involved in overseas hydrogen projects because domestic production is bound to be comparatively small and costly. They are looking to co-fire ammonia at coal-fired power generation plants to cut CO2 emissions and examining use of the fuel as a hydrogen carrier . Japanese companies have also partnered with several overseas firms on e-methane. Mizuho has to date offered $1bn for cleaner fuel projects. The bank has set a goal to accelerate the setting up of a clean fuel supply chain by addressing the financial challenge faced by projects requiring large investments. Mizuho has attempted to help Japan's decarbonisation push by tightening biomass and coal financing policies. Mizuho has also stopped investing in new coal-fired power projects, including existing plant expansions. The bank has a plan to reduce the ¥300bn credit available for coal-fired power development projects by half by the April 2030-March 2031 fiscal year and to zero by 2040-41. By Nanami Oki Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US RIN generation up in April as D4 climbs
US RIN generation up in April as D4 climbs
Houston, 16 May (Argus) — Generation of renewable identification number (RIN) credits in April rose by 12pc, as biomass-based D4 diesel credits posted their second highest monthly volumes ever. Total RIN generation rose to 2.06bn credits in April, up from 1.84bn a year earlier, the US Environmental Protection Agency reported on Thursday. D4 credits continued to lead gains in April, with generation increasing on the year by 29pc to 780mn credits. The only month with greater D4 RIN generation was December 2023. D4 accounted for 38pc of all RINs in April, up from 33pc in April 2023. Ethanol D6 RIN generation rose from a year earlier by 2.4pc to 1.2bn credits, accounting for 58pc of all RINs generated in the month. D6 credits were also up by 4pc from March, a month that was affected by seasonal ethanol plant maintenance. Cellulosic biofuel D3 credit generation rose by 7.6pc from a year earlier to 69mn credits. RINs are credits traded and produced by refiners and importers to show compliance with the EPA's Renewable Fuel Standard program. Obligated parties can produce credits when renewable fuels are blended into conventional transportation fuels or can purchase credits from other RIN producers. By Matthew Cope Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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