U.S. Renewable Market Remains Steady

U.S. Renewable Market

While the renewable market remains steady, droughts in the U.S. mid-west could put pressure on ethanol and bio-diesel. California voted overwhelmingly to extend the Cap and Trade program through 2030, which should help market sentiment. California provides unparalleled support for the renewable fuels industry and offers a stark contrast to the Trump administration’s efforts to dismantle Obama era climate policies. The LCFS credit was unfazed by the agreement and remains to trade in the $73 to $76 range.

Source: NASA

Parties Re-entering RIN Market

Obligated parties appear to be re-entering the market on a consistent basis again.  This is the likely driver behind the strong move in ethanol RINs (Renewable Identification Number).  There seems to be a feeling that achieving the mandate without drawing down the RIN bank is going to keep the ethanol market pretty tight. E17’s gained crested over the 80 cents mark. They have not been this high since January 3rd, 2017.  The market feels biodiesel production is in an okay spot relative to ethanol.  B17 RINs continue to hang out in the 110 to 112 range.  The move higher in ethanol RINs further narrowed the B17/E17 spread to 31 cents.

Crop Ratings Continue to Suffer due to Drought Conditions

In the latest week, 40% of the corn crop has entered is in the silking stage. This is up 21 points from last week but trails both the 5-year average of 47% and last year’s pace of 53%. Crop conditions edged lower over the past week. 64% of the crop is considered to be in good to excellent condition, 25% is rated as fair, and 11% as poor to very poor.  Current readings are down 1 point in the good to excellent category and a point worse in the poor to very poor category. Last year conditions were 76% good to excellent, 19% fair, and 5% poor to very poor.  Tennessee, Kentucky, and Pennsylvania are seeing the best crop conditions, while South Dakota and North Dakota are seeing some of the worst. 38% of the South Dakota corn crop is rated poor to very poor. This could put upward pressure on corn and ethanol.

Soybean blooming has reached 52%, up 18 points from last week and 1 point ahead of the 5-yr average. 16% of the soybean crop is setting pods, 3 points better than the 5-year average. Soybean crop conditions continue to decline. 61% of the crop is rated as good to excellent, 28% as fair, and 11% poor to very poor.  Week over week, ratings dropped 1 point in the good to excellent category, while adding a point in the fair category. Tennessee and Louisiana are showing crops with the best conditions, more than 80% rated good to excellent. South Dakota is only at 34%. South Dakota is facing horrible weather conditions. 93% of the state is abnormally dry, according to the US Drought Monitor, and 11% of the state is facing extreme drought conditions. Currently, only 29% of the South Dakota soybean crop is rated in good to excellent condition, while 33% is considered poor to very poor. This could put pressure on bio-diesel.