Morning Comments December 8, 2021

Cornboard Field 042221

It was another round-trip kind of day yesterday as we started out a bit weaker before seeing recovery in corn and wheat. Soybeans, pressured by what was perceived as less than desirable news from the EPA when it comes to renewable fuels, spent much of the day lower.

After failing to do so the last 3 years, the EPA finally released their updated biofuel blending requirements for 2020, 2021, and 2022. While these figures have been the center of a lot of speculation and discussion, the numbers released yesterday were basically in line with the figures leaked to Reuters in September. 

It appears as though the EPA will retroactively lower blending requirements for 2020 and 2021, helping let those refiners who had bet millions and in some cases billions off the hook to a certain extent when it comes to obligations. 

While the figures were relatively close to expectations, there were a few tweaks to rules made that some were not anticipating. At this point it appears as though renewable diesel took the biggest blow as the agency indicated next generation biofuels could take a backseat to traditional renewables. 

When looking for a silver lining in yesterday's announcement, the agency did announce $800 million in grants and infrastructure development money as well as indicated any small refinery exemption requests still open would be denied. 

In addition to the money and SRE denials, it does appear as though the agency has aggressive targets for 2022 blending requirements. They indicated upwards of 15 billion gallons of ethanol demand, though today's retroactive adjustment lower does open the door to future similar actions, giving some in the industry pause.

While we were digesting the EPA news, President Biden and Russian President Putin held a two-hour video call to discuss what was taking place along the Ukrainian border. 

It appears as though Putin is angry “the West” is working to add its neighbor to NATO, calling it an encroachment. While at the same time Biden and other NATO allies say Ukraine is a sovereign nation able to make its own decisions. 

The White House says Biden made it incredibly clear that the U.S. and its allies will react harshly to any type of aggression from Russia both in economic sanctions as well as through means of protection. 

In addition to the moves we discussed yesterday, sanctions of Putin's inner circle and removal from the SWIFT system, Biden also threatened a stoppage of the Nord Stream 2 pipeline, though one must wonder who that move actually punishes when looking at European natural gas supplies and prices. 

At this point, both sides say the talks were productive, though what Putin actually does with the nearly 100,000 troops amassed along the border in the weeks ahead will show if they actually were.

Looking ahead, we will get updated energy figures this morning. The oil market has made big moves recovering much of its losses incurred last week as folks feel a bit better when it comes to Omicron.

Secretary of Treasury Janet Yellen made comments earlier this week indicating the administration and its cohorts are aware of what is happening from an inflationary standpoint and are ready to take action. What the administration and the Fed do when it comes to fighting inflation will likely have a significant effect on where prices head after the first of the year and will need to be watched accordingly. 

Corn down 1-2

Beans down 9-10