Evening Report | December 14, 2023

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Reuters: Biden administration to recognize GREET model for SAF credits... The Biden administration is expected to recognize a soon-to-be updated methodology favored by the ethanol industry in its guidance on how companies can gain access to credits for sustainable aviation fuel (SAF) production, three sources familiar with the matter told Reuters. For months the administration has been divided over whether to recognize the Department of Energy’s Greenhouse Gases, Regulated Emissions and Energy Use in Technologies (GREET) model, which as it stands would enable ethanol-based SAF to qualify for tax credits under the Inflation Reduction Act. The administration, however, is also expected to announce it will update the GREET methodology by March 1, the sources said.

White House adviser John Podesta said on Thursday the SAF guidance would be released very soon. Earlier this week, Reuters reported the SAF credit guidance was expected by the end of the week.

Argentina reopens grain export registry, announces new ‘export dollar’ program... Argentina’s government reopened its grain export registry after temporarily suspending export registrations on Monday following a sharp devaluation of the peso, along with other economic measures announced by new President Javier Milei.

Milei also announced a new export dollar program, which was called the “soy dollar” and “agro dollar” by the previous administration. The new incentive scheme for exports implies that 80% of the exported volume will have to be settled at the official exchange rate while 20% will be settled at an 870 peso exchange rate, up 30% from the one previously in place. Unlike previous editions, the new program does not have a set ending date.

Argentine farm associations met with the new government on Thursday regarding planned tax hikes that would affect exports of corn and wheat. Milei wants to raise export taxes to 15% for corn and wheat, which the ag groups “flatly rejected,” while tariffs would remain at 33% for soybeans and 31% for soymeal and soyoil. As we’ve previously noted, adjusting export taxes would require action by Argentina’s congress. It’s uncertain when Milei will ask Argentina’s legislators to increase grain export tariffs.

Brazil farmers face desired soy seed shortage amid replanting needs... Brazilian soybean farmers are facing a dearth of seeds for their replanting efforts as suppliers have run out of the main varieties, Marino Colpo, chief executive of seed company Boa Safra Sementes, told Reuters. He noted five soy varieties from his company’s portfolio that “farmers cannot find anymore.” Colpo said, “The most sought-after products are no longer available. Some less demanded ones can’t be found either.”

In Mato Grosso, Brazil’s top soybean producing state, Colpo said around 15% of the soybean area needed to be replanted. Farmers in Goias, Minas Gerais and northern Sao Paulo also required more seeds than usual for replanting, Colpo said. Farmers in northern and northeastern areas are replanting 10% to 15% of their acres, he estimated.

U.S. export, import prices fall in November... U.S. export prices fell 0.9% for the second consecutive month in November. Import prices decreased 0.4% after a 0.6% drop the previous month.

The ag export price index advanced 0.2% in November following a 4.1% decline over the previous three months. Higher prices for fruit and soybeans more than offset lower prices for corn, meat, and other foods and food preparations. Despite the monthly advance, prices for ag exports declined 10.5% annually, the largest 12-month drop for the index since March 2016.

Drought footprint down to one-third of U.S. winter wheat area... As of Dec. 12, the U.S. Drought Monitor showed 56% of the U.S. was covered by abnormal dryness/drought, up one percentage point from the previous week. USDA estimated 32% of U.S. winter wheat areas were covered by drought, down five points from the previous week and well below 71% at this time last year.

In HRW areas, dryness/drought covered 91% of Kansas (7% D3, no D4), 64% of Colorado (2% D3, no D4), 68% of Oklahoma (1% D3, no D4), 67% of Texas (6% D3 or D4), 42% of Nebraska (11% D3 or D4), 12% of South Dakota (no D3 or D4) and 43% of Montana (no D3 or D4).

In SRW areas, dryness/drought covered 100% of Missouri (1% D3, no D4), 63% of Illinois (no D3 or D4), 98% of Indiana (no D3 or D4), 41% of Ohio (no D3 or D4), 56% of Michigan (no D3 or D4), 77% of Kentucky (no D3 or D4) and 97% of Tennessee (19% D3 or D4).

Click here to view related maps.

Canada sees sharp rise in HPAI infections in poultry flocks... In Canada, there has been a significant increase in the number of commercial poultry flock infections with highly pathogenic avian influenza (HPAI) since Sept. 11, totaling 70 cases. Of these, 49 infections have occurred in British Columbia, while Alberta has reported 10 affected commercial flocks. The Canadian Food Inspection Agency’s HPAI web tracking does not provide details regarding flock size or the species of the affected flock.

In 2022, Agriculture and Agri-Food Canada reported around 2,823 regulated chicken producers in Canada, whereas the U.S. has approximately 25,000 chicken operations. Additionally, Turkey Farmers of Canada has 520 members, while the U.S. has around 2,500 turkey operations. In comparison, data from the USDA’s Animal and Plant Health Inspection Service, as of Dec. 12, showed the U.S. had reported 99 infected flocks in the poultry sector.

ECB leaves rates unchanged, avoids dovish stance... The European Central Bank (ECB) left interest rates unchanged, noting that if “maintained for a sufficiently long duration, will make a substantial contribution to (the inflation) goal.” ECB did not hint that policy easing was creeping over the horizon, repeating that “rates will be set at sufficiently restrictive levels for as long as necessary.”

President Christine Lagarde said ECB “shouldn’t lower our guard” in the inflation battle. She noted, “We will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction.”

Meanwhile, ECB said full reinvestment under the 1.7 trillion euro Pandemic Emergency Purchase Program will end on June 30 and the portfolio will then fall by 7.5 billion euros per month until the end of the year. Previously, all cash from maturing debt in the bond-buying program was set to be reinvested through the end of 2024.

Manchin criticizes upcoming hydrogen tax credit rules... Sen. Joe Manchin (D-W.Va.) expressed strong dissatisfaction with the upcoming Treasury Department guidance for claiming hydrogen production tax credits under President Joe Biden’s climate law. He described the rules as “horrible” and believes they will make it extremely challenging for applicants to qualify.

These rules have been a subject of intense debate within the Biden administration, particularly regarding the sources of power allowed for hydrogen production. Manchin, who played a role in crafting the hydrogen tax credit provisions of the climate law, is determined to oppose these rules. He claims the upcoming rules are far more stringent for hydrogen production than the law intended.

The Treasury Department is legally obligated to consider the lifecycle greenhouse gas emissions resulting from clean hydrogen production. Ignoring these emissions could provide subsidies for hydrogen production that exceeds the statutory emissions thresholds.

An administration official argues the hydrogen tax credit is essential for the U.S. to lead in the clean hydrogen industry, create jobs, reduce cost, and lower emissions in hard-to-reach sectors like heavy-duty transportation and industry.

Hydrogen is considered a crucial fuel for decarbonizing heavy industries like steel and cement, and the tax credit is seen as a vital incentive for its development. However, there are concerns that without strict rules mandating the use of clean-power sources for hydrogen production, it could increase demand for fossil-fuel-based electricity and result in more greenhouse gas emissions.

The forthcoming guidance is expected to align with the three pillars advocated by some in the environmental community and industry: new clean supply, hourly matching and deliverability. It may limit the tax credit to hydrogen production powered by recent clean-power projects and require ongoing use of clean-power sources.

Bottom line: Manchin, known for his support of the natural gas industry, has been in disagreement with the Biden administration over various policy matters. He opposes the inclusion of environmental safeguards as a prerequisite for accessing the tax credit and is actively working to raise awareness about the potential consequences of these rules, including legal challenges.

Study: Grass-fed beef isn’t more climate-friendly than traditional grain-fed meat...  The reason is largely because of the amount of land needed for grazing, according to a study that could impact policymaking to mitigate agriculture emissions. A study based on reviews of 100 beef production operations across 16 countries reveals that claims of low-carbon beef often overlook a significant factor: the carbon opportunity cost of land use. The research, led by Daniel Blaustein-Rejto, director of food and agriculture at the Breakthrough Institute, examined the carbon footprint of beef production.

The study highlights that to accurately assess the carbon footprint of beef production, land use impacts must be considered. Specifically, the study compared the relative carbon footprint of grass-fed beef, where cattle consume grass and forage, with grain-fed beef produced in feedlots. It found that beef from pasture-finished operations, which rely more on grazing, produces 20% higher greenhouse gas emissions and has a 42% higher carbon footprint than beef from feedlot operations.

This difference arises primarily in the “finishing stage” for cattle, where pasture-finished cattle continue to eat hay and grasses until they reach slaughter weight, while some cattle in feedlot operations are transitioned to a grain-based diet.

The study also emphasizes that grass-fed and other pasture-finished operations can displace native ecosystems and reduce land available for restoration efforts, such as tree planting. Some mitigation measures to reduce emissions include improved grazing management and breeding animals more resistant to disease and heat.

The findings have implications for policy strategies aimed at mitigating emissions from beef production, as beef-related emissions account for a significant portion of global greenhouse gas emissions, ranging from 6% to 14.5% based on various estimates.