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Corn & Soybean Demand and Capturing Carbon

Update for March 19th 2021

For the third time this week the USDA has confirmed a flash sale of U.S. corn to China, bringing the total for the week to 121 million bushels. Weekly corn export inspections have been increasing and are now at the highest level in over 26 years. More sizable sales to China are expected soon due to the robust demand within China from their refining industry as well as feed mills. Current estimates show Chinese corn demand climbing as high as 40 million tons almost 4 times from the 2020 total of 11 million ton. (Bloomberg)

Corn prices in the U.S. have prompted the Chinese Ag Ministry to ask for approval to lower the corn and soy content currently required in animal feed. The agency issued a document this week outlining their plan to have nutrition specialists design new guidelines on how to replace corn and soymeal with alternative grain by the end of the month. If they are able to devise a more cost-effective plan global grain trade will see serious impacts. (Reuters) While this is not certain it’s important to be aware of possible changes going forward.

Corn demand at U.S. ethanol plants has been improving and inventories are decreasing which is boosting plant profitability. This increased demand for ethanol is helping industry margins and has led to higher prices for corn producers as plants are now bidding up for corn. For example, our local Valero plant in Lakota had a push bid earlier this week offering zero basis, this is not unique and more of these opportunities are very possible between now the end of the summer.

New crop corn acre estimates have market bulls concerned as projections currently range between 93 to 94 million acres. They caution that the market has moved so far so fast that it may sit in the current price range until the U.S. weather market ramps up in a few weeks. Recent flash sales to China are a good example, large sales with little price movement.

U.S. soybean export sales are near the USDA target for the entire marketing year which runs through August. Total sales for the current marketing year sit at 60.634 MMT, just a fraction off from the entire season USDA projection of 61.240 MMT. The demand story for soybeans is now being shadowed by the headlines in corn demand, lower crush numbers and the fact that we have now moved into the time of the year when typically, soybean purchases move away from the U.S. product to the newly harvested South American crop.

Reduction in carbon emissions is now a focal point and the Summit Agricultural Group has launched a new business to assist with the goal. This project, which is the largest in the world, is partnering the Summit Agricultural Group and Midwest bio-refiners in an effort to help with the capture of carbon and its storage. The $2 billion plan includes a pipeline that will carry the carbon captured at ethanol plants throughout the Midwest and move it to storage sites in North Dakota. Bruce Rastetter CEO of the Summit group explained that the state of North Dakota has the perfect geological conditions for CO2 storage, called deep saline formations. The liquified carbon will be stored in these porous canyons located at least 1 mile underground. In addition, North Dakota offers an easier path to attain the required permits for the project. The construction of the project could take up to 16 months to complete and is expected to be operational by 2024.

The process involves the capture of the CO2 during the fermentation process. The CO2 would then be liquefied at the plant and then released into feeder pipelines that will link up to the main pipeline which will reach across the Upper Midwest into central North Dakota. The first phase of this operation involves 18 of the top biorefineries in Iowa, Minnesota and North and South Dakota. Eventually they hope to expand to included other carbon emitting facilities like fertilizer producers and power plants.

Geoff Cooper president of the Renewable Fuels Association says this project is a significant development for the ethanol industry. “And frankly, puts ethanol…on an even keel with the best electric vehicles that are out there in terms of their carbon footprint.” Rastetter added that this project will take 10 million tons of CO2 out of the atmosphere every year or the equivalency of taking 2 million cars off the road each year. (Source: Harvest Public Media, Grist, Associated Press)

The weekly drought monitor shows some improvement week-over-week following recent rainfall.

The outlook through next Friday is shown in the following map. Additional rainfall is expected to fall across many of the driest area of the Midwest and Plains states.

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