Biofuels debate heating up in DC
With all of the activity in Washington, it can be hard to keep up with some of the less-covered agriculture policy stories. But this week, the Renewable Fuels Standard (RFS) has been front and center. In relatively short order, a complaint by Texas Senator Ted Cruz gained traction and led to not one, but two meetings of corn/ethanol and oil industry representatives with President Donald Trump.
Cruz and a Pennsylvania oil refiner have pointed their fingers at the RFS as the culprit in job losses and facility closures while the corn/ethanol/biodiesel industry is defending the law as not only a job creator but also as a key factor in reducing dependence on foreign oil. The first meeting with Trump was held early in the week to find ways to potentially help the struggling refinery business. U.S. Department of Agriculture Secretary Sonny Perdue said that those representing the corn and ethanol side of the argument did not give an inch in the initial meeting.
A follow-up took place on Thursday, without any resolution. While it would be difficult to change the law, especially without angering a major portion of the Trump base, it is not impossible. And if the RFS is reduced or replaced in a way that cuts demand for agricultural products, the market would see a huge drop in price (primarily for corn and soybean oil). Not only would the market get hit, but the farm community would be devastated as many are supported by the relationships with local ethanol and biodiesel producers.
While Minneapolis futures have not seen the same support, the Kansas City and Chicago futures contracts have been on fire. These markets have been stepping higher for weeks, but this week saw a continuation of drought conditions in the U.S. Central Plains with no rain relief in the forecast, and that brought the buyers out in a big way. Conditions through the winter rarely have a significant impact on final production, but spring is nearly here and forecasts do not show much precipitation to provide relief. Prices have surged with daily moves in the 15 to 20-cent range. A good rain could easily cool the rally and help the winter crop, but for now, support will continue.
Durum markets have been steady in the last week. Export sales were small and prices have not changed much in the last several weeks. With all of the excitement in the wheat markets, durum has not been impacted, as drought has been focused in the winter wheat areas of the U.S. Weather forecasts hold plenty of precipitation for the month of March for the northern Plains and prairies, so there are not any major concerns for the 2018 crop at this time.
Canola prices have continued to firm up. Support is coming from drought in Argentina. Dry conditions have reduced expected soybean output significantly, and as a major global supplier of soybean meal and oil, the drop in output shifts demand to other sources. Canola prices are hitting their highest level since December, but the entire rally is not from Argentina. Technical buying has pushed prices upward as well, even with supplies at a comfortable level. Look for ongoing support for canola as the Argentine crop is harvested.
Peas and lentils
Pulse news has been light in the last week. Markets are well supplied with the lack of demand from India (due to government moves to raise import duties and support local growers). Prices have been steady.
Mustard seed export pace reported by the Canadian Grains Commission has the 2017-18 crop on pace with a year ago. Slow movement has kept markets quiet as the spring planting season approaches.
Global demand for barley has been strong in recent weeks. Export demand from Asia is good, and prices are finding support as a result. With farmers' planting efforts just a couple of months away, the increase in barley prices could persuade some to increase barley area. Official planting projections for the U.S. will be released at the end of the month while Statistics Canada's report on plantings is set to come out in April.