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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Egypt’s NCIC issues fertilizer sales tender
Egypt’s NCIC issues fertilizer sales tender
London, 22 July (Argus) — Egyptian fertilizer producer NCIC has issued a tender to sell 50,000t of fertilizers for loading by the end of August, closing on 26 July. The breakdown of the products offered is as follows: 30,000t of DAP 10,000t of TSP 5,000t of CAN 27 5,000t of urea The cargoes will be sold on fob basis. NCIC wants buyers to pay 30pc in advance, 40pc two days before the shipment date and 30pc in cash against documents. If paying through letters of credit, buyers can pay 30pc in cash in advance and the remaining 70pc by letter of credit. NCIC did not issue a tender to sell July-loading product. It reported selling 40,000t of DAP at $562/t fob and 30,000t of TSP at $435/t fob under its tender to sell June-loading product at the end of May. Since then, Egyptian DAP prices have risen to $610-620/t fob. NCIC reduced its DAP production rates to 80pc capacity last week because of low gas supplies. It had resumed DAP production earlier this month. Argus assessed TSP prices in Brazil at $505-515/t cfr last week, netting back to the $480s/t fob up to the low $490s/t fob Egypt. NCIC sold 5,000t of urea at $362/t fob and a further 5,000t at $367/t fob, reported last week . Argus understands NCIC stopped producing urea last week. There has been no indication that production has resumed. By Tom Hampson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
European sulphuric acid market squeezed on outages
European sulphuric acid market squeezed on outages
London, 22 July (Argus) — The European sulphuric acid market is going through a period of tight supply following outages at smelters and lower production rates at sulphur burners, which have impacted overall availability of acid in the domestic market. The industry is working on a week-by-week basis as availability remains variable because of lack of availability from smelters and lower availability of molten sulphur impacting sulphur burner operations. As a result, sellers and distributors face uncertainty as the volatile supply has resulted in order cancellations as they cannot guarantee quantities to their offtakers further than two weeks ahead for both types of acid, in some cases. The supply shortage has been reflected in an increase in the third-quarter contract settlements for both smelter and sulphur-burnt acid, which settled on 18 July. Smelter-based acid contracts for the third quarter rose by around €10-15/t on the previous quarter, while third-quarter sulphur-burnt acid contracts rose by €30-40/t on the previous quarter. There are concerns in the domestic market that start-up issues at a key supplier in northwest Europe will tighten availability further. Aurubis' Hamburg plant — which produces high-quality acid — faced problems following its return from maintenance on 11 July. The smelter had been off line undergoing heavy maintenance since early May. The shortfall in smelter acid from the Aurubis closure could in turn have a knock-on effect on refinery sulphur production by limiting availability of higher grade sulphuric acid for the alkylation process. It is not yet clear how long production at the plant could be curtailed, but it has further squeezed the market of high-quality sulphuric acid. Overall, the market is likely to be short of supply in July and into the first half of August with industry sources concerned about the limited supply to cover the requirements for the domestic industry. By Lili Minton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Von der Leyen faces new Green Deal challenges
Von der Leyen faces new Green Deal challenges
The president promises a ‘clean industrial deal', but will need to make compromises over climate policy, writes Dafydd ab Iago Brussels, 19 July (Argus) — Ursula von der Leyen's re-election by the European Parliament as president of the European Commission on 18 July promises to see a doubling down on climate and energy policy, with her 2024-29 mandate stipulating greenhouse gas (GHG) emissions cuts of at least 90pc by 2040 compared with 1990. "I have not forgotten how [Russian president Vladimir] Putin blackmailed us by cutting us off from Russian fossil fuels. We invested massively in homegrown cheap renewables and this enabled us to break free from dirty Russian fossil fuels," von der Leyen says, promising to end the "era of dependency on Russian fossil fuels". She has not given an end date for this, nor specified if this includes a commitment to ending Russian LNG imports. Von der Leyen went on to detail political guidelines for 2024-29. She has pledged to propose a "clean industrial deal" in the first 100 days of her new mandate, albeit without giving concrete figures about how much investment this would channel to infrastructure and industry, particularly for energy-intensive sectors. The clean industrial deal will help bring down energy bills, she says. Von der Leyen told parliament that the commission would propose legislation, under the European Climate Law, establishing a 90pc emissions-reduction target for 2040. Her political guidelines also call for scaling up and prioritising investment in clean technologies, including grid infrastructure, storage capacity, transport for captured CO2, energy efficiency, power digitalisation and a hydrogen network. She plans to extend aggregate demand mechanisms beyond gas to include hydrogen and critical raw materials, and notes the dangers of dependencies and fraying supply chains — from Putin's energy blackmail to China's monopoly on battery and chip raw materials. Majority report Passing the necessary legislation to implement her stated policies will now require approval from EU states and parliament. Unless amplified by Germany's election next year, election victories by far-right parties in France and elsewhere appear not to threaten EU state majorities for specific legislation. Parliament's political centre-left S&D and liberal Renew groups, as well as von der Leyen's own centre-right European People's Party (EPP), have elaborated key policy requests. These broadly call for the continuation of the European Green Deal — a set of legislation and policy measures aimed at 55pc GHG emissions reductions by 2030 compared with 1990. A symbolic issue for von der Leyen to decide on — or compromise on — is that of internal combustion engine (ICE) vehicles. EPP wants to stick to technological neutrality and revise the current mandate for sales of new ICE cars to be phased out by 2035, if they cannot run exclusively on carbon-neutral fuels. The EPP wants an e-fuel, biofuel and low-carbon fuel strategy. Von der Leyen's guidelines reflect the need to gain support from centre-right, centre-left and greens. She says the 2035 climate neutrality target for new cars creates investor and manufacturer "predictability" but requires a "technology-neutral approach, in which e-fuels have a role to play". She has not mentioned carbon-neutral biofuels. It will be impossible for von der Leyen to satisfy all demands in her second mandate. This includes policy requests put forward by the EPP, ranging from a "pragmatic" definition of low-carbon hydrogen and market rules for carbon capture and storage, to postponing the EU's deforestation regulation. EU member states are expected to propose their candidates for commissioners in August, including for energy, climate and trade policy, with von der Leyen's new commission subject to a final vote in parliament in late October. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Trump vows to target 'green' spending, EV rules
Trump vows to target 'green' spending, EV rules
Washington, 19 July (Argus) — Former president Donald Trump promised to redirect US green energy spending to other projects, throw out electric vehicle (EV) rules and increase drilling, in a speech Thursday night formally accepting the Republican presidential nomination. Trump's acceptance speech, delivered at the Republican National Convention, offered the clearest hints yet at his potential plans for dismantling the Inflation Reduction Act and the 2021 bipartisan infrastructure law. Without explicitly naming the two laws, Trump said he would claw back unspent funds for the "Green New Scam," a shorthand he has used in the past to criticize spending on wind, solar, EVs, energy infrastructure and climate resilience. "All of the trillions of dollars that are sitting there not yet spent, we will redirect that money for important projects like roads, bridges, dams, and we will not allow it to be spent on the meaningless Green New Scam ideas," Trump said during the final night of the convention in Milwaukee, Wisconsin. Trump and his campaign have yet to clearly detail their plans for the two laws, which collectively provide hundreds of billions of dollars worth of federal tax credits and direct spending for renewable energy, EVs, clean hydrogen, carbon capture, sustainable aviation fuel, biofuels, nuclear and advanced manufacturing. Repealing those programs outright could be politically difficult because a majority of spending from the two laws have flowed to districts represented by Republican lawmakers. The speech was Trump's first public remarks since he was grazed by a bullet in an assassination attempt on 13 July. Trump used the shooting to call for the country to unite, but he repeatedly slipped back into the divisive rhetoric of his campaign and his grievances against President Joe Biden, who he claimed was the worst president in US history. Trump vowed to "end the electric vehicle mandate" on the first day of his administration, in an apparent reference to tailpipe rules that are expected to result in about 54pc of new cars and trucks sales being battery-only EVs by model year 2032. Trump also said that unless automakers put their manufacturing facilities in the US, he would put tariffs of 100-200pc on imported vehicles. To tackle inflation, Trump said he would bring down interest rates, which are controlled by the US Federal Reserve, an agency that historically acts independently from the White House. Trump also said he would bring down prices for energy through a policy of "drill, baby, drill" and cutting regulations. Trump also vowed to pursue tax cuts, tariffs and the "largest deportation in history," all of which independent economists say would add to inflation. The Republican convention unfolded as Biden, who is isolating after testing positive for Covid-19, faces a growing chorus of top Democratic lawmakers pressuring him to drop out of the presidential race. Democrats plan to select their presidential nominee during an early virtual roll-call vote or at the Democratic National Convention on 19-22 August. By Chris Knigh t Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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