EPA Proposals Would Bring Major Changes to the U.S. Biofuel Efforts

Last Week’s Moves 

Corn 640-0  (-4.92%)  |  Soybeans 1438-6 (-1.41%)  |  SRW Wheat 737-2 (-5.06%)

KC Wheat 846-6 (-5.28%)  |  Live Cattle 156.150 (+0.97%)  |  Lean Hogs 90.875 (+7.11%)

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Welcome to your weekly agriculture report, where we cover everything you’ll need to know for the week ahead. This week, EPA proposes major changes to the United States biofuel efforts and farm income jumps to record highs. 

EPA’S RFS Proposals Would Bring Major Changes to United States Biofuel Efforts

Current EPA proposals would bring major changes to the way the United States mandates biofuels by encouraging the use of renewable natural gas to power electric vehicles. EPA is projecting corn ethanol consumption to continue trending upward, with a major increase in domestic production.

• Speaking of oil… The Biden Administration recently approved the use of canola oil in the making of renewable diesel and other biofuels. Federal standards and regulations have been changed to make this possible. Biden allowed E-15, gasoline that uses a 15% ethanol blend, to be sold this summer. 
   
• Talkin’ about Texas… The Biden administration recently approved the construction of an oil export terminal roughly 30 miles off the Texas coast. Production at this terminal would add roughly 2 million barrels per day to the U.S. oil export capacity. This project is expected to create 1,400 temporary construction jobs and 62 permanent jobs.

Farm Income Jumps to Record High

High commodity prices will propel U.S. net farm income to a record $160.5 billion this year,  despite a steep climb in expenses, according to the Agriculture Department.  When adjusted for inflation, the Economic Research Service said net farm income in 2022 would be 53.3% above its 20-year average of $104.7 billion.

• Exceeding Expectations… The latest report contrasts with both USDA’s original February estimates, which forecast a $5.4 billion (-4.5%) decline in net farm income, and  USDA’s September estimates, which forecast an increase of only $7.3 billion (5.3%). 
   
• Income Initiatives… A large majority of the 2022 net farm income is expected to be produced by crop and livestock cash receipts, a record increase in production costs, and a decrease in ad hoc government support, resulting in an overall increase of forecast net farm income.

Despite the increase in net farm income, farmers and ranchers still face concerns related to credit access and the rising cost of financing farming operations. 

• Rising rates... Interest rates for farm loans were on the rise this year and look to continue to rise heading into 2023.  Should commodity prices start to decline, costs may remain elevated and be slow to adjust downward.
   
• Interest Impact… As interest rates increase, the first impact to the farm is on operating loans as they can only be one year at a time. With rising operating expenses forecasted for the rest of 2022 and 2023, this will likely increase the amount of operating debt needed.  

What else you need to know…

• Congress steps in to avoid a Railroad Strike… Congress met last week with hopes to pass legislation aiming to avert a national railroad strike, which would cripple the movement of 30% of all U.S. cargo. A shutdown of the railroad, even temporarily, would prove to be catastrophic and damage commodity prices.
• Tesla Motors announces semi truck advancements… Elon Musk Tweeted that a Tesla Semi weighing in at 81,000 lbs made a 500 mile drive successfully on a single charge. Tesla also stated that the electric semi has three times the power of a diesel truck, and is more efficient per mile.
• U.S. Agriculture Secretary Tom Vilsack meets with Mexico President… Secretary Vilsack met with Mexican President López Obrador to discuss the importance of the bilateral trade agreement between the United States and Mexico. American farmers send about 17 million tonnes of corn each year to Mexico.

That’s all we have for you this week, do you have anything for us? We’d love to hear from you with stories or recommendations for new sections to include! Drop us a line at news@barchart.com with any feedback or input.

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