French Crop Condition Scores Indicate Limited Problems
- France’s FranceAgriMer estimates on Friday that 80% of French soft wheat condition scores were rated good/excellent for the week ending June 17. This number is unchanged from last week.
- Last year 75% of the winter wheat crop was rated 75% good/excellent.
- French winter barley was rated as 75% good/excellent.
- France’s spring barley crops was rated 87% good/excellent.
- French corn crop showed slight weakness declining to 81% classified as good/excellent.
- What It Means For The US Farmer: At FBN we believe that the weekly French crop condition scores can be interpreted as bearish indicators for Matiff-wheat futures. We also believe that the high condition scores indicate a lack of a production or a supply challenge which can be bearish for the U.S. corn export program. Increased supplies of European feed grains can translate to increased exports which can increase competition and suppress demand for U.S. corn.
President Trump Orders Review of Ethanol Exemptions
- President Donald Trump has directed members of his Cabinet to review the administration’s expanded use of waivers exempting small refineries from the nation’s renewable fuel, or biofuel, policy.
- Since Trump took office, the Environmental Protection Agency has more than quadrupled the number of waivers it has granted, saving the oil industry hundreds of millions of dollars, at the expense of the nation’s corn producers.
- U.S. Renewable Fuel Standard (RFS), is a more than “decade-old” law which mandates refineries and sets annual ethanol production targets.
- The RFS also provides waivers to small refining facilities that can prove compliance would cause them financial harm.
- Any move to alter the small refinery waiver program could face resistance from the oil industry. The oil industry has publicly threatened to sue the Trump Administration over the decision to grant 38 production waivers for small refiners during the current 2018/19 marketing year.
- What It Means For The US Farmer: At FBN we believe that the domestic ethanol industry is at an interesting juncture. As the industry has matured over the last 14 years since President Bush signed the RFS into law, there have been several periods of industry consolidation. We believe that a shrinking 2019/20 U.S. corn crop can force corn prices higher and strain ethanol producing margins. We believe that higher ethanol prices can be uncompetitive against gasoline which could allow for another round of exemption applications in the 2019/20 marketing year. Ultimately when an ethanol refinery does not produce ethanol, local corn basis can soften which is a negative for the U.S. farmer.
The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)