No Bull, December 1

There's a first time for everything

I heard a couple firsts over the holiday weekend:

First, after observing Genevieve at breakfast one morning an older couple came over and said, “we are confident little Genevieve will run a Fortune 500 company one of these days.”

The second came at the resort pool where a nice gentleman observing her non-stop waterslide ventures said, “I’d like to go long if she is selling stock.”

I will give her credit for breaking Tripp out of his shell though. He has turned into Mr. Adventurous at her lead.

Yes, we are going on ~week 3 of goggle mania.

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Will it work like the first time?

After September’s highly successful Dólar Soja program, Argentina decided to try it one more time in December.

In an effort to generate much-needed export tax revenues to bolster central bank reserves, the Argentine government put a new soy dollar in place on Monday, offering producers an exchange rate of 230 pesos per US$ for new soybean sales.

This new rate is even better than September’s 200 pesos/$ which gave farmers a ~40% pricing boost overnight, resulting in 14 mmt of soybean sales during one month’s time (equal to one-third of Argentina’s entire crop).

Sales are noted in both blue (delivery commitment) and orange (fixed price contract) bars below.

Initial sales with the new program have been underwhelming but that was expected. Farmers have ample cash on hand after September’s sales plus Argentina’s hot and dry conditions are not exactly encouraging producers to make additional sales.

Officials note that sales over the first three days of this latest program are equal to half of the tonnage sold during the first three days of September.

The program also reduced export taxes on soy products by 2% to further incentivize crush versus the export of whole soybeans.

The program runs through the end of December.

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The eRIN makes its debut

EPA’s long-awaited RFS blending obligations for the next three years have finally been released. There are two things worth remembering for the sake of today’s discussion:

1. The mandate increases were disappointing, especially for soybean oil.

   There has been much build up (spec buying of SBO) as the U.S. increases soy crush capacity, capitalizing on record-high soybean crush margins that have been driven by the (California’s LCFS) renewable diesel gold rush. The mandate is not large enough to support this onslaught of oil availability and ultimately signals the EPA is pivoting away from traditional liquid biofuels.

2. When I say pivot, I mean EPA is leaning toward more advanced biofuels that do not compete with the food system/are less carbon intensive themselves. Today’s most notable item though is their introduction of a new type of RIN into the program.

Remember, RINs are identification numbers generated each time a gallon of biofuel is produced. Cleaner, greener fuels generate a larger amount of RINs (this is the government’s way of encouraging a transition to cleaner energy).

In accordance with the RFS, refiners of gasoline or diesel are required to meet annual blending obligations set forth by the EPA (i.e. what was released today for the next three years).

To meet those obligations refiners can either blend the required volumes of biofuels into gasoline or diesel - or they can purchase enough RINs to be in compliance.

Today’s announcement shook up the world of RINs:

In a first, EPA has proposed an eRIN credit awarded when electricity from certain renewable sources is used to power EVs. The eRIN introduces a pathway for electric vehicle makers like Tesla to generate credits, just as an ethanol plant or biodiesel facility would.

Up to an estimated 1.4 billion eRINs could be generated by 2025, with power harnessed by renewable sources such as natural gas harvested from a landfill.

This credit is designed to further encourage the production of EVs, helping with the U.S. goal of net zero by 2050 and piggybacking off of the Biden Administration’s Inflation Reduction Act (aka the big, green bill) that was passed earlier this year.

EPA will hold a virtual public hearing on January 10 for the proposed rule. EPA is then obligated to finalize its quotas by June 14.

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A Few Firsts

Avian Influenza - 52 million & counting

Late last week 2022’s Avian Influenza outbreak hit a significant milestone, passing 2015/16’s bird losses as the largest such outbreak in American history.

More than 52 million birds have been lost to date, with 8 turkey outbreaks and one massive laying hen outbreak (1.7 million chickens in Nebraska) this past week, alone.