The Week In Alternative Fuels: The USDA Sends Grain Prices Down, And Shares In Ethanol Companies Rise.
By Sally White / www.poweralternatives.com
On Friday the US Department of Agriculture (USDA) announced that harvests for the two largest alternative energy feedstock crops, corn and soya, will hit record levels this year. Some brokers disagree, believing that deterioration in the weather is likely to bring cuts in the latest USDA projections. Crops were planted late, so flowering is also late too, leaving the crop with a relatively short period to set and develop seed. The brokers who disagree with the USDA suggest that corn forecasts in particularly could be heavily out. But this more cautious approach has yet to be reflected fully in prices. Price support could yet come, as demand from ethanol producers increases.
Still, on the back of hopes of lower raw materials prices, brokers put out a string of “buy” recommendations on US ethanol companies such as VeraSun Energy, Aventine Renewable Energy and BioFuel Energy. A bigger crop would also be good news for US oilseed processors, including Archer Daniels Midland and Bunge. “We are building a cushion of supplies that warrants lower prices”, said Joe Victor at Allendale in Illinois. “We had perfectly timed rain in August to help plants fill pods with beans. For end-users, this is good news.'”
The USDA also had gloomy words for European grain producers. It expects bumper northern hemisphere crops and a 26 per cent slump in exports to leave European grain stocks one third larger than current forecasts for the end of the 2009-10 marketing year. And in Europe, higher than expected yields in France and Germany drove wheat prices down. In Europe Liffe wheat fell £3.00 to close at £92.25 for November and £106.25 for next May, according to Gleadells. Liffe prices were depressed by the stronger pound and also on the prospects of lack of export markets, as competition from US and Eastern European harvests rises. US wheat prices, meanwhile, fell to two year lows. September wheat fell to US$4.24 a bushel, while December closed at US$4.59.
Corn prices in the US, however, rose on Friday, capping the biggest weekly gain since July, as the USDA’s forecast for record demand brought projections for reduced inventories, despite a bumper harvest. Consumption and exports will rise 8.1 per cent from the previous year to a record 13.025 billion bushels, more than this year’s output of 12.954 billion bushels, the USDA said. Stockpiles are projected to drop 3.5 per cent to 1.635 billion bushels by August 31st. Corn futures for December delivery rose to US$3.1975 a bushel on the Chicago Board of Trade, up 4.4 per cent this week. That puts prices at their highest for seven weeks, even after touching an 11 month low of US$3.02 on 8th September. The most-active contract has declined 21 per cent in value this year. “You have a very large crop, but we are going to use all of it”, said Alan Kluis, president of Northland Commodities in Minneapolis. “There are a lot of people who wanted to buy corn at lower prices and some may have stepped in today.”
US soybean prices tumbled under pressure of large crops. In the US the harvest is now expected to be 1.4 per cent larger than was forecast a month ago, according to the USDA. US production will total 3.245 billion bushels, up from 3.199 billion projected in August, the USDA added. The huge harvest comes as Argentina is due to produce 52 million tonnes of soy next crop year, a full 20 million tonnes ahead of this year’s figure. Brazil will produce a further five million tonnes more than this year at 62 million. Cash soybean prices will average US$9.10 a bushel in the crop year that began on 1st September, down from last month's estimate of US$9.40, the USDA forecast. Soya bean futures have plunged 21 per cent so far in 2009 as demand has fallen even though farmers planted more. Global soya consumption is forecast at a record 231.6 million tons, up from the August forecast of 231.3 million, and up from an estimated 221.4 million likely to be produced this year. World inventories next year before the North American harvest are estimated to hit 50.5 million tons, up from the 50.3 million forecast a month ago, and up from 40.2 million this year.
US carbon traders were downbeat as delays to the proposed emission trading legislation currently under consideration by the US Senate threatens US corporate interest. Legislation was supposed to be in draft form by early September, but it is not expected now to emerge from committee deliberation until the end of the month, delaying passage until well into 2010.
Ethanol prices at the close of last week were torn between the rally in US corn futures and a sharp sell-off on energy markets. In the US October contracts were the only ones to close higher, up US0.2 cents at US$1.594. A clearer direction is expected to emerge this week. Ethanol profitability levels continue to weaken, with margins falling as grain prices rise.
Spot uranium trading continues to be depressed by the lack of direction from the US Department of Energy on its plans for funding clean-up work at the Portsmouth, Ohio nuclear facility. TradeTech’s Spot U308 indicator stood at U$45.00 per pound U308, down US$1.00.
Prices for carbon on the Chicago Climate Exchange have fallen to between just US20 cents and US25 US cents a tonne in recent weeks, after trading above US$2.00 in April. Prices in the north-eastern states Regional Greenhouse Gas Initiative (RGGI) market are also at their lowest point, at around US$2.55 against US$3.50 earlier in the year when the scheme first began. Analysts are expecting further falls of between 20 per cent and 30 per cent.
