USDA Analysts to Meet with EPA Today Re: Regular Meeting to Discuss S/D Factors

July 13, 2012 03:09 AM

via a special arrangement with Informa Economics, Inc.

Focus continues on whether EPA may modify ethanol RFS mandate

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

USDA analysts will meet today with Environmental Protection Agency (EPA) staffers in a regularly scheduled meeting in which various issues will be discussed and USDA analysts provide an update on supply and demand conditions, a government source confirmed.

Commodity traders in recent days have discussed whether or not EPA would modify the corn-based ethanol mandate for 2013 as a result of tumbling US yields and supply concerns. US government officials say no waiver request has yet been received at EPA and if one were to surface, the EPA must make a decision on any request within 90 days. That timeline was stretched in 2008 when a waiver request was made in late April by the governor of Texas, but it took until Aug. 7, the day before the USDA August Crop Production report, before EPA rejected the waiver request.

EPA could act on its own announce a modification without a waiver request, but this is highly unlikely, sources concur.

"In order for EPA to waive RFS requirements, the agency must find that the program is causing economic 'harm,'" the Renewable Fuels Association (RFA) said earlier this week. The agency can reach such a finding on its own, or it can be asked to examine the question of "harm" via petition from the public. "EPA must provide a public comment period and consult with other relevant agencies before making any final decisions regarding a waiver request," according to RFA. "In short, EPA cannot waive the overall RFS targets on a whim – there is a well-defined process for waivers." The organization noted that ethanol stocks currently stand at about a billion gallons of ethanol in the market, at least enough for the rest of the summer. Despite the fact that production dropped to the lowest of the year last week, the industry remains on pace to easily satisfy this year’s RFS target of 13.2 billion gallons. Year-to-date monthly EIA production data shows annualized ethanol production of 13.9 billion gallons.

Meanwhile, EPA July 6 sent its final rule setting 2013 volume requirements for biomass-based diesel for White House Office of Management & Budget review.

Comments: Be aware of some, likely, self-serving trader conjecture on this topic, some of which are clearly not accurate. I've seen reports on this topic even from some analysts who ought to know better that got the RFS waiver procedure wrong. On this matter, there should be ample signs of any possible changes. There would be interagency committee meetings held on the topic, and besides, USDA Secretary Tom Vilsack, who would not make the final decision, has been known to reveal some market-sensitive things in the past. So stay tuned to that possibility. The pressure point for change will increase with each yield tick down for the U.S. corn crop.


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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