US energy watchdogs
are "absolutely not" mulling an easing in ethanol targets to reduce
the pressure on corn supplies, despite significant damage to the crop from
heat, a senior official said.
speculation in grain markets that the Environmental Protection Agency is poised
to waive obligations for ethanol use in the US is "just rumour", a
spokesperson for the watchdog told Agrimoney.com.
The comment came
amid a fresh round of market talk of an easing in restrictions after EPA data
showed US daily ethanol production falling last week by 19,000 barrels a day to
802,000 barrels a day – the lowest since records began in 2010.
followed testimony to US lawmakers by Margo Oge, director of the EPA's office
of transportation and air quality, in which she said the watchdog was
"absolutely not" considering waiving obligations for the use of
futures for December, the best-traded contract, recovered from early losses to
post 1.6% gain in late deals, reaching $7.84 a bushel, after news of the
testimony was revealed.
The testimony can
be viewed at http://www.ustream.tv/recorded/24061680, with the
comments on the ethanol mandate starting at about 17 minutes.
Ms Oge, in response
to questioning over rumours of a waiver, told admitted to a House Energy and
Commerce Subcommittee that the EPA had been "in discussion with colleagues
from US Department of Agriculture".
However, even after
the USDA's 1.8bn-bushel downgrade last week to estimates for domestic corn
production this year, the crop was still set to be the "third highest… in
the records of the country".
|US ethanol output drops as corn prices rise|
Week ending June 8: 920,000 barrels a day
June 15: 900,000 barrels a day
June 22: 883,000 barrels a day
June 29: 857,000 barrels a day
July 6: 821,000 barrels a day
July 13: 802,000 barrels a day
more acres, so more corn produced this year than produced last year," she
The EPA did have a
process under which regulated companies, and state governors, can petition the
agency to waive obligations on renewable fuels on grounds of "lack of
availability… and significant cost impacts to the region or the state".
have not seen any petitions", Ms Oge said, adding that the receipt of any
requests would kick-off a process including a 90-day consultation period.
The reduction in US
ethanol production last week took above 10% the drop in output since mid-June,
when a drought now officially stamped as the most extensive since 1956 began
sending grain prices soaring.
The price of US
corn, of which some 40% is used in making ethanol, has soared by one-half,
putting pressure on biofuel plant margins, and encouraging shutdowns which have
so far seen about 12 factories mothballed, and left the industry running some
15% below usual capacity.
However, the latest
ethanol production data, while "pretty dire", may not be all down to
pressure on margins, Jerrod Kitt at broker Linn Group said, noting also the
impact of the heatwave in the Midwest, where many plants are based, so as to be
near to the source of their main raw material.
plants do not like excessive heat," Mr Kitt told Agrimoney.com.
efficiency of what is a biological process," based on fungal breakdown of
"It can also
effect electricity generation."
A cooling in
Midwest temperatures was likely to see a slowdown in the rate of decline in
recovery in ethanol prices, up 30% in the last month for the best-traded August
contract, had revived production margins to, on paper, show a small profit.
positive basis, making cash purchases more expensive than futures, producers
were likely running at a headline loss of some 5-10 cents a gallon, although
this was still an improvement of levels of 30 cents a gallon hit last month.