Energy bust threatens farmer earnings

  • Market: Agriculture, Biofuels, Fertilizers
  • 03/30/20

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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02/22/24

South Australia raises winter crop output forecasts

South Australia raises winter crop output forecasts

Sydney, 22 February (Argus) — South Australia's (SA) grain crop output projections for the 2023-24 season have increased but are still lower thanrecord-high 2022-23 production. SA's crop production is projected to reach 9.289mn t during April 2023-February 2024 from the 9.19mn t forecast in November, according to the Department of Primary Industries and Regions South Australia (Pirsa) January crop report. This is similar to the 2020-21 season of 9.135mn t but below the 12.788mn t recorded in 2022-23. Favourable weather conditions in November resulted in an early completion of harvests, with exceptional grain quality, according to Pirsa. But the rainfall in December delayed harvests of later crops and downgraded grain quality, which achieved feed grades. Frost damage in October was not as severe as the dry conditions reported during late winter and early spring, according to Pirsa, which affected grain yields. Wheat production in SA is forecast to reach 5.287mn t in the April 2023-February 2024 season, down from 7.33mn t in 2022-23 , according to Pirsa. Barley production is projected at 2.34mn t, down from 3.08mn t the previous season, with canola production of 507,180t down from 684,000t in 2022-23. December 2023 rainfall has caused subsoil moisture to be at historically high levels, according to Pirsa, providing valuable soil moisture for 2024 crops Federal research organisation the Australian Bureau of Agricultural and Resource Economics and Science predicts SA's winter crop production to drop by 31pc to 8.7mn t because of drier El Nino weather conditions. But the forecast is an increase from its September's projection of 8.1mn t because of crops performing better than expected despite the dry conditions. By Meyshna Nair Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Andersons crush margins to drop after record 4Q


02/21/24
News
02/21/24

Andersons crush margins to drop after record 4Q

Houston, 21 February (Argus) — US agribusiness conglomerate The Andersons posted record fourth-quarter profit in its renewables business but expects a seasonally weak first quarter for ethanol crush margins. Pretax profit in the renewables business rose to $33mn in the fourth quarter, up from $13mn a year earlier, driven by record production and improved yields at the company's four ethanol plants, chief executive Patrick Bowe said Wednesday on a conference call. "Much improved" ethanol crush margins in the fourth quarter have narrowed in the current quarter on seasonally weak demand, which is typical for the business, Bowe said. Crush margins may improve starting in the second quarter on industry maintenance shutdowns and seasonally higher driving demand in the spring, he said. The renewable diesel feedstocks business contributed to profit growth in the fourth quarter and full year, and the company is looking to accelerate gains with an acquisition, particularly a producer of lower carbon intensity (CI) feedstocks. The Andersons is weighing investments that would reduce the CI of ethanol production, including carbon sequestration for the company's three ethanol plants in the eastern US, where the geology is favorable, Bowe said. Producing lower CI ethanol would allow the company to produce sustainable aviation fuel (SAF) from ethanol, he said. "There really isn't any ethanol-to-jet without low carbon ethanol," Bowe said. "And that's what we're really focused on is making sure that we're able to participate in that market when it happens." 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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Marine fuel global weekly market update


02/20/24
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02/20/24

Marine fuel global weekly market update

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Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Houthi missile hits Saudi fertilizer vessel off Yemen


02/20/24
News
02/20/24

Houthi missile hits Saudi fertilizer vessel off Yemen

London, 20 February (Argus) — The crew members of the Belize-flagged Handysize bulk carrier Rubymar , carrying a cargo of Saudi fertilizer, have abandoned ship off Yemen after it was hit by a missile fired by Houthi militants late on 18 February. The British-owned vessel was in the Gulf of Aden near the Bab el-Mandeb strait when it was hit by at least one missile while another missed its target, according to US Central Command. The UK Maritime Trade Operations (UKMTO) said it had received reports of an attack 40 miles (about 64.4km) south of Mokha, Yemen, on an unnamed vessel. US Central Command confirmed that the Rubymar sustained damage and then issued a distress call that was answered by a coalition warship and another merchant vessel. The crew was evacuated safely and have been transported to the port of Djibouti, according to the Djibouti Ports and Free Zones Authority. The Rubymar was last located on vessel-tracking data in the Bab el-Mandeb strait between Yemen and Djibouti. The UKMTO said the vessel was at anchor and had been abandoned. A Houthi social media statement said the ship was at risk of sinking. The vessel departed the Saudi port of Ras al-Khair on 8 February and was bound for Varna, Bulgaria, on the western edge of the Black Sea, vessel-tracking data show. It was due to arrive on 27 February. There has been no confirmation as to what grade of fertilizer was on board, although vessel-tracking data do list fertilizers as the cargo. Bulgaria in the past has imported NP grades from Saudi Arabia. A spokesperson for the Saudi producer declined to comment on any aspect of the incident. The size of the vessel would indicate a cargo of about 30,000t. This is the second confirmed major strike on a vessel carrying fertilizer in the region. In mid-January, the US-owned Genco Picardy , carrying a cargo of 30pc P2O5 phosphate rock from Egypt to India, came under drone attack by Houthi militants. This caused a fire onboard that was extinguished and the vessel proceeded to Thoothukudi. By Mike Nash Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Egypt’s Helwan signs deal to produce black urea


02/20/24
News
02/20/24

Egypt’s Helwan signs deal to produce black urea

London, 20 February (Argus) — Egyptian urea producer Helwan has signed an agreement with SML-INNO UK to produce 130,000 t/yr of black urea. Production is expected to start in 5-6 months. The agreement was signed on 18 February. Helwan said that black urea, a slow-release fertilizer, should boost crop growth while using 25-30pc less nitrogen than conventional urea. The Egyptian producer did not provide additional details regarding the production process. The project, which will target European and UK markets, is likely to cost $5mn. Helwan currently operates a 635,000 t/yr granular urea facility. By Dana Hjeij Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.