RVO, Price Charts and a Dry Outlook
Update for September 23rd, 2021
Yesterday news agencies OPIS, Bloomberg and Reuters each reported that the EPA is planning to make a reduction in RVO’s or Renewable Volume Obligation for years 2020 through 2022. There has been no official announcement from the EPA regarding their decision, industry observers are speculating the official announcement could come as soon as tomorrow. When the news was leaked the RFA came forward and said that they had been made aware of a “spoofing attempt” and that some reporters had received an email showing, “fake 2020-2022 RVO numbers that were supposedly shared by RFA with its members.” The RFA responded, “We want you to know this is a complete fabrication and shameful “spoofing” attempt. We are trying to get to the bottom of who is sending this and why. RFA never sent out any such email or circulated any potential RVO numbers to our member companies. RFA does not have any information regarding the 2021-2022 RVO numbers or possible revisions to the RVO. Like everyone else, we are anxiously awaiting the public release of the RVO proposals and will have more information and comment at that time.” A spokeswoman for the EPA, Emily Skor, told DTN that the agency does not have any comment on the reports. Skor did say that these potential blending volumes released by the various news agencies would indicate that President Joe Biden and his administration are not meeting the commitments made to the biofuels industry. “If these rumors are true, this would be backpedaling on the president’s commitments to uphold the RFS and would add 22.8 million metric tons of carbon emissions back into the air-the equivalent of adding 5 million more cars back on the road. It’s hard to imagine any justification for the administration to make such a move.” There are some who believe that the EPA will be lowering the RFS biofuels blending mandates to coincide with the administrations push for more electric vehicles. Big Oil is likely arguing that if they plan push for more electric vehicles and allow less combustion engines then it should also reduce the current blending mandates.
Corn export numbers were announced today and this week the trade was looking for a number between 500,000 to 1.0 MMT vs last weeks reported exports of just 246,000. Globally, dry weather in SAM is allowing for more planting progress with a reported 22% of this first and smaller corn crop now planted. (Notice the First Planted Corn vs Second Crop map below) China is dealing with recent flooding in some key farming regions within the country which could mean a reduction by the trade in their projected production totals for China which is something to keep an eye on.
Here at home much of the Eastern Corn Belt has been receiving an abundance of rainfall which is slowing harvest progress while much of the Central and Western Corn Belt remain dry. There is a lot of discussion regarding the prevalence of corn disease this fall, particularly Tar Spot. Jerry Gulke explained on the Weekend Market Talk, “We’re hearing more reports from our clients. Some were thinking they would have 200 bushels to 210-bushel corn, but it comes in at 150 bushels. Diseases are bringing down test weights and almost acting like an early frost.” Farm Journal Crop Field Agronomist and owner of Crop-Tech Consulting, Ken Ferrie says that this week the disease is taking a real toll on crops in parts of Illinois. “In a number of fields, not only have the wheels come off the bus, but it’s sliding down the highway on its frame and the sparks are flying.” He has found that fields that could have seen record yields but were not sprayed with a fungicide and have heavy disease pressure are likely to see a substantial drop in yields. “At best, those fields will still produce a good crop but without a fungicide application, we probably left money on the table. Jerry Gulke estimates that “if you get 8% reduction in test weight (51-52 lbs. TW) on 25% of the corn crop in the United States, that’s a 2% reduction in total yield or about 3.5 bushels per acre. That tightens things again. Traders are starting to do those calculations. So (last week market prices) ended the week stronger because of that.”
We never really know what to expect in grain prices but currently resistance on the corn charts sits in the $5.40 to $5.50 range on the topside with support in the $4.95 to $5.15 range. Below is a chart that shows market price activity for the past 50+ years which gives a visual historical data and while corn prices have fallen off from summer highs you can see we still sitting pretty good. The second chart shows the soybean price movement over the same time span.
According to the private group AgRural soybean planting in Brazil is off to a slower start than normal due to the “low humidity” even in areas where there has been some rainfall lately and looking ahead the forecast looks to remain dry over many key areas for the next week.
Autumn officially arrived this week. We also saw one of the most widespread rainfall events the Midwest has seen all summer with totals ranging from ½ inch to 2 inches.
Looking ahead there is a chance for some precipitation tomorrow but beyond that there are few opportunities for any additional meaningful rainfall amounts for the next couple of weeks. Any rainfall that falls tomorrow is likely to be very light, around 1-2/10ths at best.
The Euro has published the following map for October 30th notice the snow amounts this model forecasts for late October. Over the past 2 years we have seen measurable snowfall in October but most outlooks support a warmer than normal month of October this year. Although there are some early signs emerging that winter will get off to an early start in mid to late November and stick with us on through the end of the year.
Average temps vs normal for the next 7 days along with the EURO and GFS models through October 1st are included below.
