July 28, 2017

U.S. Circuit Court Rules in Favor of Biofuels

The U.S. Circuit Court of Appeals for the District of Columbia ruled against the United States Environmental Protection Agency Friday. Todd Gleason interviews University of Illinois Agricultural Economist Scott Irwin on how the ruling could impact biofuels production in the United States.

The U.S. Circuit Court of Appeals for Washington, D.C. under took a case to define the meaning of three words in the Renewable Fuel Standard written by the United States Congress. The three words, a phrase, are “inadequate domestic supply”. Congress through them says University of Illinois Agricultural Economist Scott Irwin granted the Environmental Protection Agency, the EPA, the right to grant a waiver allowing energy producers not to follow the law, “Which common sense would say, yes, you need that kind of escape clause in the statute that would say if a biofuel is not being produced you cannot require someone to consume it.”

The Obama Administration’s EPA interpreted the clause to also mean inadequate domestic demand, and consequently limited the mandated use of biofuels in the United States. The court ruled on how the EPA limited biofuels in 2016, however, it may be, thinks Irwin, that EPA will need to make good actions it took in 2014, 2015 and 2016. This may mean the gallons of biofuels not mandated for use in those three years will have to be produced and used says Irwin, “That’s right, and they even conveniently provided a table in the ruling with their calculations of how much mandate was waived that should not have been. In the three years this added up to 2.24 billion gallons of ethanol equivalents was at play in the cuts that have now been basically declared illegal.”

In the three years this added up to 2.24 billion gallons of ethanol equivalents at play in the cuts that have now been basically declared illegal.

It would take about 800 million bushels of corn to make that much ethanol. However, because there are two parts to the RFS relating to ethanol, it’s not likely corn based ethanol will be the big winner when it comes to making up the lost gallons thinks Scott Irwin, “Because of the E–10 blend wall I think, ultimately, the beneficiary of this will be biodiesel or more broadly speaking biomass based diesel. It has been filling the gaps in the E–10 blend wall in the ethanol mandate for a number of years and I don’t see why that would change dramatically with this rule making.”

Because of the E–10 blend wall I think, ultimately, the beneficiary of this will be biodiesel…

The back fill will require about one-point-five billion gallons of biodiesel. It would use about 11 billion pounds of feed stock. The number one feed stock is soybean oil.


July 26, 2017

Soybeans More Profitable than Corn

read blog post

Soybeans have been more profitable than corn over the last three years, and an ILLINOIS agricultural economist expects that to continue to be the case this year and next.



Gary Schnitkey has updated crop budgets for highly productive central Illinois farmland. It shows, as was the case in 2013, 2014, 2015, & 2016, that planting soybeans will make farmers more money than planting corn this year and in 2018. The cash price of corn will need to exceed $4.00 a bushel if that is to change, at least with soybeans in the high $9.00 a bushel range. Schnitkey in his farmdocDaily article, you can find that online, says there are four points to be aware of as it relates to the 2017 and 18 crop budgets.

 

  1. first, these can change as expected yields and price evolve
  2. second, repeating this, corn needs to be above four bucks if it is to really compete
  3. third, total returns from highly productive central Illinois soils won’t be as much this year as in 2014, 15, or 16.
  4. fourth and finally - cash flows are likely to be very tight this year and next.

 


July 25, 2017

A Weather Market & Corn Yields

Each day the weather changes and just as often, it seems, so has the direction of corn prices. Todd Hubbs from the University of Illinois was of the opinion a couple of weeks ago that corn market had a some upside potential. It did, but now, maybe it doesn’t. This has him thinking about the number of acres of corn in the United States, the impact of the weather on yield, and how the market might react August 10th when the United States Department of Agriculture releases the first corn crop production report of the season, "We talk about increased corn acreage and maybe a yield loss below trend. Is that seven bushels to the acre, five bushels, or two bushels. It is really hard at this point to say, but I am looking at, out of my little model, 168 bushel national yield.

Still it is hard to say what USDA is going to put out on August 10th. Hubbs says he is looking forward to seeing what they say about yields. If the market is pricing in 164/165 bushels to the acre for yield corn and USDA releases a 168/169 yield, then Hubbs says the price moves won’t be good.

Here’s the upshot for Hubbs. He does not think the amount of corn left over from last year is particular oppressive to the market place. It’s big, but not enough to really weigh heavily on price. So, if this year’s corn crop isn’t near average there will be upside price potential, “I’m not as high on corn prices as I was before, but I think there is still a possibility. I see the seasonal average farm price for 17/18 corn in that $3.80 to $3.85 range with some runs.”

I see the seasonal average farm price for 17/18 corn in that $3.80 to $3.85 range with some runs - Todd Hubbs

You may read more from University of Illinois Agricultural Economist most Monday’s on the farmdocDaily website.


July 20, 2017

Corn Belt Crop Tour July 18-22

* hit the square in the upper right corner of the map to take it full screen.
* you may see photos/video by clicking on the blue pins.
* click the photos/video to make them bigger/play.
* come back often as photos/video will be added over time.


July 13, 2017

2018 EPA RFS Still a Biofuels Push

by Scott Irwin & Darrel Good, Agricultural Economists
University of Illinois
read full blog post

Implications

We analyzed the magnitude of the “push” in production and consumption of biofuels implied by the proposed rulemaking for the Renewable Fuels Standard (RFS) for 2018 released last week. We find that the proposed standard for 2018 implies a measurable push in the consumption of conventional ethanol since the mandate exceeds expected domestic consumption. The magnitude of that gap is estimated at 640 million gallons for 2018, compared to the estimate for a record large gap in 2017 of 738 million gallons. The gap ranged from 260 to 457 million gallons in 2014–2016. The advanced biofuels mandate is estimated at 684 million gallons in 2018, compared to the estimate of 900 million gallons in 2017 and the actual gap of 438 million gallons in 2016. Our analysis of the proposed rulemaking for 2018 implies:

(1) The EPA under the new Administration is “staying the course” on the implied conventional ethanol mandate with that mandate at the statutory level of 15 billion gallons. If that policy continues and the rate of increase in domestic gasoline consumption does not accelerate more rapidly, there will continue to be a notable conventional ethanol gap beyond 2018.

(2) The push in advance biofuels production and consumption remains large, but is smaller than in 2017 as both the total biofuels mandate dropped and the mandate for undifferentiated advanced biofuels declined marginally. However, the minimum undifferentiated mandate will increase by statute in 2019 to 4.5 billion gallons. So, even though the biodiesel mandate is proposed to stay constant at 2.1 billion gallons for 2019, the total advanced mandate gap could jump another 260 million gallons (4.5 –4.24 billion gallons).

(3) The relatively large conventional ethanol gap implied for 2017 and 2018 suggests that the current discount in the price of D6 (ethanol) RINs relative to D4 (biomass-based diesel) RINs will continue to narrow towards equality (e.g., farmdoc daily, December 4, 2015).

(4) Biomass-based diesel is likely to remain the “marginal gallon” for filling both the conventional and advanced mandate gaps. This means relatively large levels of biodiesel production will continue to be required which in turn will require large levels of fats and oils feedstock.


July 04, 2017

Corn, the Markets, & Yield

Crunch Time for Corn
Posted on July 3, 2017 by Emerson NafzigerWhile the record will show that corn planting progressed at a more or less normal rate this spring in Illinois, wet, cool conditions that developed after nearly half of the crop had been planted resulted in a great deal of replanting, especially in the flat-soil areas of Illinois. Some fields damaged by water and some that were too wet to plant before late May likely were planted to soybeans instead of corn. The June 30 acreage report shows Illinois corn acreage dropping by 500,000 from 2016 to 2017 (to 11.1 million acres) and soybean acreage increasing by 290,000 acres, to 10.4 million acres in 2017...  READ MORE.

June 30 Stocks and Acreage Reports Implications for Corn and Soybeans
Posted July 2, 2017 by Todd Hubbs

On June 30, the USDA released the Acreage and Grain Stocks reports. The Acreage report surprised many observers and generated strong positive movements in corn and soybean prices. The following discussion recaps the information contained in the reports and the price implications for corn and soybean prices.

June 1 corn stocks were estimated at 5,225 million bushels, nearly 500 million bushels larger than last year and about 100 million bushels larger than the average trade guess. Total disappearance during the quarter was 3,400 million bushels. Estimates of corn exports during the quarter are at 688 million bushels. Corn used for ethanol and co-product production during the quarter totaled 1,342 million... READ MORE.


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