Evening Report | February 20, 2024

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Reuters: Biden administration to approve year-round E15 sales, but not until 2025... The White House will approve a request from a group of Midwest governors to allow year-round sales of E15, but will push the start date into next year, Reuters reported, citing two sources familiar with the matter. The one-year delay could put off any potential localized price spikes and supply issues the oil industry says could arise from the decision until after the November election, the sources said.

Under the plan, the administration would grant a 2022 request from the governors of Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota and Wisconsin to allow year-round sales of E15, starting in 2025. In the meantime, EPA could issue a temporary waiver enabling such sales as needed, the sources said.

EPA sent a final rule on the proposal to the Office of Management and Budget in December with an effective date of April 28, 2024. The new timeline would push the effective date to 2025, the sources said.

The official announcement is expected by late March.

Vilsack comments on year-round E15 sales, SAF tax credits... USDA Secretary Tom Vilsack said he was confident expanded sales of gasoline with higher blends of ethanol would be available across the country in 2025. Until then, he said the administration would likely issue temporary waivers this summer to enable such sales as needed. Those comments seemingly confirm the Reuters report.

Vilsack also spoke on an anticipated decision on guidance around new U.S. tax credits for sustainable aviation fuel (SAF). Vilsack said he was confident the incentives would include room for climate-smart agricultural practices, making it easier for products grown on farms to be used as feedstock for the lower-carbon aviation fuel.

“We have to make sure that the model recognizes and incorporates the various practices that farmers are engaged in,” Vilsack said at the National Ethanol Conference in San Diego.

As we reported in “First Thing Today,” Reuters reported, according to sources, the Biden administration is poised to announce an adjustment to its scientific modeling for ethanol that will show the corn-based fuel to be less effective at reducing greenhouse gas emissions than previously estimated. The adjustments would make it more difficult for ethanol producers to take part in the lucrative new U.S. tax credits for SAF. But it will still leave them a pathway to the subsidies if they can partner with corn growers that use sustainable farming practices.

Shell-backed ethanol firm considers making SAF in Brazil... The world’s biggest supplier of ethanol made from sugar cane is considering building an SAF plant in its home country of Brazil, Bloomberg reported. “We truly believe that there is a structural advantage to producing in Brazil,” the top sugar-cane-growing nation, Raizen SA Vice President of Trading Paulo Neves said.

The company, owned by Shell Plc and Cosan SA, sees economic sense in producing SAF in Brazil given it requires such large volumes of the feedstock. Shipping costs for exporting the final product would be 70% less than the cost of exporting ethanol for processing into jet fuel abroad, Neves said.

Still, plans for a local SAF factory are in early stages and Raizen is still analyzing the economics of such a plant. A Brazilian SAF plant would be competing in the global market with factories located in countries that already have tax incentives in place, Neves said.

RFA remains optimistic about ethanol industry... The Renewable Fuels Association (RFA) unveiled its optimistic “outlook” publication on the ethanol industry’s status as its annual meeting commenced in San Diego. Alongside this release, the group also presented a pocket guide and provided links to previous Outlook publications.

According to RFA, the U.S. ethanol industry experienced significant successes in 2023, both in market performance and public policy advancements. The organization highlighted that as 2024 commences, the future appears exceptionally promising for ethanol. RFA emphasized the importance of fortifying existing partnerships, forging new alliances and nurturing innovative collaborations, strategies they’ve been implementing for over four decades.

California’s EV market slows amid challenges and concerns... After years of rapid growth, the electric vehicle (EV) market in California is showing signs of slowdown due to various factors such as high vehicle prices, unreliable charging networks and potential consumer fatigue, particularly towards Tesla and its CEO Elon Musk, according to an article in the Los Angeles Times.

Sales of EVs declined significantly in the last half of 2023, raising concerns about California’s ability to meet its ambitious climate goals, including banning the sale of new gasoline- and diesel-powered vehicles by 2035. Although EV sales started strong in 2023, with a 48% increase in the first half of the year compared to the previous year, sales dropped in the latter half.

Despite these challenges, momentum behind the EV transition remains strong, with significant investments from manufacturers and government mandates worldwide. However, several obstacles such as unreliable charging infrastructure, insufficient public chargers, high vehicle prices and confusing incentives continue to hinder widespread EV adoption.

Addressing these challenges will be crucial for the EV market’s sustained growth.

Argentina’s Parana River navigation resumes... Argentina’s Parana River reopened to shipping traffic on Tuesday after a grounded boat was freed, though boats were told to load less grain while the damage to the channel was assessed. “Navigation is now freed up,” Guillermo Wade, the head of the maritime port chamber, told Reuters, adding he had received notification from authorities that ships could go up the Parana River again to the Rosario port terminals. Shipping traffic through the Parana is relatively light at this time of the year since transport of soybeans and corn mainly starts around April when new-crop supplies become readily available.

Investors increasingly pouring funds into U.S. farmland... Investors view farmland as a lucrative asset amid population growth and resource scarcity. The value of farmland held by investment groups has more than doubled in the past three years, reaching $16.6 billion by the end of 2023, according to the National Council of Real Estate Investment Fiduciaries (NCREIF). This surge is expected to continue due to climate change and the growing global population, the Financial Times reports. Factors like the Covid-19 pandemic and geopolitical events have further boosted agricultural land’s appeal to investors, with its resilience against inflation highlighted. Despite concerns raised by some farmer organizations regarding the impact on rural communities, institutional investors remain drawn to farmland as a stable long-term investment.

Mercosur/EU trade agreement update... Argentina’s foreign minister, Diana Mondino, has suggested the lengthy Mercosur/European Union (EU) trade agreement may require segmentation into smaller components. This statement follows a meeting with her French counterpart.

Opposition towards the treaty is particularly intense in France, primarily due to concerns raised by the country’s farmers, who fear that the deal would facilitate the influx of inexpensive imports.