Last week documents revealed the Environmental Protection Agency (EPA) issued Renewable Fuel Standard (RFS) waivers to refineries after the time had lapsed to redistribute lost gallons for renewable fuels.
“That proves just what a cynical and systematic effort EPA had been engaged in to try and reduce demand, because they knew reducing demand would be a way of reducing the price of credits that refiners utilize,” said Bob Dinneen, CEO of the Renewable Fuels Association (RFA).
On AgriTalk Tuesday, Dinneen told host Chip Flory EPA administrator Scott Pruitt’s decision to hand out waivers to numerous refiners has ultimately resulted in a loss of more than a billion gallons of RFS demand.
While ethanol blends are cheaper for refiners, Dinneen said that isn’t where bigger refiners make their money.
“The Integrated guys make their money, not from blending or refining, but from extraction; and every gallon of ethanol that is used is a gallon less of oil that needs to be extracted. That’s where the economic incentive is—to reduce demand—and Scott Pruitt has been doing everything he can to reduce demand.”
To Flory the negative attention surrounding Pruitt “seems like an exit strategy.”
“To me…and he is looking to land a nice cushy job in the oil industry,” said Flory
Soybeans and Trade with China
The U.S. is preparing to send some of its negotiation heavy hitters to China for trade talks, including U.S. Trade Representative Robert Lighthizer, while some believe there will soon be an agreement on NAFTA.
“This [China] has to be the number one priority for the U.S. administration, but when you consider one out of every three rows of soybeans planted in America have historically ended up in China, this is a pretty major roadblock potentially that we are facing,” said Brennan Turner, CEO for FarmLead.
While China is important to U.S. trade, many have wondered why the president would place tariffs on them to begin with
“Historically speaking, if you have any insider knowledge into how President Donald Trump has done deals its ask for a lot at the beginning, and then draw it out and then get 10 to 20 percent better than what you first hoped for,” said Turner.
Brennan said that, at least in the short term, China is going to have to come to the U.S. for soybeans regardless of what happens.
He said that there is only so much that other countries can produce before China would have to start looking to other crops to meet their needs, which he said doesn’t add up.
Interest Rates and Corn Prices
The Federal Reserve’s two-day policy meeting started on Tuesday, and the consensus seems to be that interest rates will not be increasing, yet.
“This meeting we don’t expect much…we are looking more towards June for some additional announcement on what is going to happen, but we are seeing signs that inflation could increase particularly in the energy and oil market ,“ said Sterling Lidell, vice president for RaboAgrifinance.
Flory asked Lidell about the possibility of their being two different interest rate hikes this year.
“It really is going to have to do with what is happening with inflation,“ said Lidell. “Hopefully it won’t be affected by political races because we really do need to watch this economy…there are some signs we need to be cautious moving forward.”
Click on the player above to listen to the full AgriTalk discussion.