Following a formal public consultation, proposal and review, S&P Global Platts has launched an assessment reflecting the value of T2 FOB Rotterdam ethanol with high…
Jan 04, 2021
Following a formal public consultation, proposal and review, S&P Global Platts has launched an assessment reflecting the value of T2 FOB Rotterdam ethanol with high greenhouse gas savings, effective Jan. 4, 2021.
GHG savings in the EU are measured as an absolute level of carbon intensity (CI), or as a percentage GHG saving compared to the fossil fuel comparator. This new assessment reflects ethanol meeting a maximum CI of 18.82g CO2e/MJ. This is equivalent to a minimum GHG saving of 80% based on a fossil fuel comparator of 83.8g CO2e/MJ under the European Commission’s Renewable Energy Directive (RED) I.
The new Premium Ethanol T2 FOB Rotterdam assessment is published as a differential to the Ethanol T2 FOB Rotterdam assessment, in Eur/cu m. Apart from product specification, the new assessment reflects the same assessment parameters as the Ethanol T2 FOB Rotterdam price, such as volume, location basis and laycan.
This launch follows market feedback demonstrating interest in further transparency in ethanol with greater GHG savings. Although the threshold of GHG savings may differ from country to country in this space and may be impacted by market fundamentals, ethanol with a maximum CI of 18.82g CO2e/MJ was indicated as a level at which the pricing of a differential would be most distinct. This level was also indicated to be relevant to countries that have strong consumption of ethanol with high GHG savings.
Platts launched a formal public consultation on its European T2 ethanol assessments March 16, 2020. A proposal note was published on June 2, 2020, with a decision note published on July 17, 2020.
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Jan 12, 2021
2020 was an unusual year for the global rice market. While much of the coverage focused on Asian markets, the Americas dealt with major production swings, huge influxes in demand and the resulting price volatility.
In the latest Platts Agriculture Focus podcast, Peter Storey is joined by Raymond Shi and William Bland to discuss supply issues and harvesting in South America, demand for rice from the US South, in addition to a possible influx of Central American and Iraqi demand for Americas rice in Q1 2021.
Jan 18, 2021
What’s happening? South America remained a big focus of the agriculture industry in late 2020, with weather, production and supply developments driving a huge rally in the grain markets. In Argentina, after several back-and-forth decisions on a corn export ban, the government reversed its decision Jan. 12 after a series of strikes paralyzed the agriculture economy. Further soybean and corn production cuts in Brazil due to dry weather have raised fresh supply concerns, while last week the US Department of Agriculture sharply slashed US corn and soybean yields and ending stocks, taking the markets by a surprise.
What’s next? On the buy side, besides rising demand in other Asian nations, China’s voracious grain demand growth is adding pressure. As a result, an apparent mismatch between supply and demand is expected to support grain export prices in the coming weeks. As of Jan. 13, prices of corn and soybean delivered into Northeast Asia and China have already risen 13.7% and 15%, respectively, over the past month. After Russia’s announcement of grain export curbs starting February, markets will keep a close eye on trade measures as major grain producers aim to contain domestic food inflation amid expected limited supplies.
What’s happening? Freight rates have spiked to 14-month highs on major grains routes to Asia in January 2021, as a flurry of spot market fixtures met limited tonnage supply. Voyage rates on Panamax and Supramax class ships sailing from East Coast South America and US Gulf Coast ports to China reached their strongest levels since October 2019. The sudden rush of activity on fronthaul routes is attributed to pre-Lunar New Year buying in China, but the number of cargoes does not appear to be unusual. Instead, shipowners and operators say the rate increase is supply driven and a factor of increasing average ton miles, with ships taken out of the market for up to 80 days on these long-haul routes.
What’s next? Rates held near the highs for several days, with shipowners resisting weakness in the paper market and forcing charters to step up their bids. Some shipbrokers in the Atlantic basin are struggling to find available tonnage for grains cargoes to Asia, and some anticipate congestion at receiving ports. With Brazil’s soybeans export season set to pick up pace in late February and March, regional freight rates could see bullish support in the weeks ahead.
What’s happening? The cost of US biofuels compliance saw a volatile week amid conflicting reports about Environmental Protection Agency plans in the final days of the Trump administration. Renewable Identification Number prices spiked late in the week as reports emerged that the EPA would not grant small refinery exemptions to the federal biofuel mandate in the coming days despite earlier reports that exemptions were imminent. RINs, tradable credits that track production and use of alternative transportation fuels, had fallen sharply on Jan. 11 following the US Supreme Court’s announcement that it would review an earlier decision from the 10th US Circuit Court that would have limited the number of EPA exemptions. The market was thrown into further uncertainty when the EPA opened public comment on four petitions to waive the 2019 and 2020 biofuel blending requirements for all refiners due to COVID-19.
What’s next? The market remains in a holding pattern until a firm EPA announcement on biofuel blending mandates for 2021 and the petitions for 2019/2020 blending requirements, which will now be resolved after the Biden administration takes the reins. RINs could remain volatile as traders digest the possibility of small refinery exemptions if the Supreme Court favors refiners. Market participants will also scrutinize monthly EPA data due Jan. 21 to see if any exemptions were granted in the past month.
What’s happening? Bangladesh has started to switch from gas to oil for power generation. While power demand so far in January has been trending above year-ago levels, generation from gas-fired power plants fell by about 1.5 GW year on year, while S&P Global Platts Analytics has observed an increase of 1.4 GW in oil-fired power generation on the year. The push from gas to oil is likely facilitated by the current tightness in the LNG market. Bangladesh has had problems obtaining bids for recent spot tenders of LNG, and is likely short on gas.
What’s next? All Asian countries that import LNG face the same dilemma as Bangladesh. Beyond Japan, which has ample oil capacity, we see significant switching potential in South and Southeast Asia. In addition to Bangladesh, the most likely countries to switch from gas to oil are Pakistan and Malaysia. Platts Analytics puts the increase fuel oil demand due to switching in the 16,000-24,000 b/d range for January and February.
What’s happening? European commercial air traffic showed signs of an uptick over the week to Jan. 13, averaging about 59% below 2019 levels in the second week of January compared with 60% a week earlier, according to tracking data from AirNav. Western Europe already has the highest percentage of lost airline capacity globally — 65% below levels seen at the start of last year. European oil demand is forecast to have fallen 17%, or 1.5 million b/d, in 2020, with jet fuel and gasoline seeing the biggest falls in demand at 55% and 17%, respectively, according to S&P Global Platts Analytics.
What’s next? The threat of extended lockdowns and travel restrictions in the region continues to focus attention on near-term demand expectations. Commercial air traffic is closely correlated to jet demand and Platts Analytics estimates Europe’s jet/kerosene demand to have been 655,000 b/d lower year on year in December 2020. Market watchers are closely following the pace of vaccine roll-outs and infection rates to gauge the expected recovery path for jet fuel during 2021.
The fast pace of events in 2020 left commodity markets—and everyone else—scrabbling for information to make sense of unpredictable times. Throughout the year, S&P Global…
Jan 01, 2021
As WTI crude cements its place in the European crude import slate, S&P Global Platts is consulting with the market to include the US grade in Dated Brent.
Global oil majors must urgently adapt strategies for a changing energy system. S&P Global Platts considered the evolution of their upstream risk and the extent of inroads into the power and renewables space.
The presidential candidates put forward contrasting energy policy platforms, and Joe Biden’s win represents a shift towards a proactive climate strategy, including more clean energy.
Big changes are coming up in the EU ETS, a core component of the bloc’s strategy to transition to a low-carbon economy.
Supported freight rates this year suggested the container shipping sector got its market management strategy right.
The risks posed by the coronavirus pandemic to the global agriculture supply chain became evident early in the year, as shutdowns, delays and disruptions became the norm.
The Russia-Saudi Arabia accord on oil market management collapsed in March, putting crude markets in a tailspin.
Global planned hydrogen production capacity soared, as companies and national governments looked to harness the gas for decarbonization. Here’s an essential guide to production pathways.
Platts Biofuelscan enables confident trading and investment decisions through a daily snapshot analysis of the biofuels market, powered by S&P Global Platts robust and independent methodology.
Jan 24, 2020
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After a year of disruption and uncertainty, this edition of Insight looks at emerging themes in energy, from sustainable aviation fuels to China’s net zero…
Dec 15, 2020
After a year of disruption and uncertainty, this edition of Insight looks at emerging themes in energy, from sustainable aviation fuels to China’s net zero aspirations and the impact of the US election.
New Delhi — Brazil’s soybean crush volumes are expected to remain elevated in 2021 on high demand, while the outlook for Argentina’s crushing industry is…
Jan 05, 2021
Brazilian crushers’ sales soared for most of 2020 due to high domestic and export demand, while Argentina’s crushers grappled with labor strikes, high taxes, negative margins, tight raw beans supply and logistical bottlenecks, analysts said, predicting similar trends for the two nations in 2021.
They key challenge for the Argentinian processors in 2021 is likely to be a low or even negative crush margin due to soaring input and logistical costs, a Rosario-based economist said. Argentinian soybean prices, which rose almost 88% year on year to $341/mt in December 2020, are expected to continue surging in 2021, putting margins under tremendous pressure, she said.
The world’s largest soy meal and oil exporter is also expected to ship low volumes of soy product in 2021 due to high export taxes of 31%.
Argentina typically exports over 90% of its soy products, according to Pete Meyer, head of grain and oilseed analytics at S&P Global Platts. But high export taxes are likely to bring down the export volume markedly, he said.
In addition, crushers in Argentina are expected to face a supply crunch for raw soybeans in 2021, as the government’s currency control policies discourage farmers from selling.
According to economists, the gap between official and unofficial exchange rates in Argentina ended 2020 at close to 75 pesos per US$ and was likely to widen to 100 pesos in the second half of 2021.
Once the currency control measures are lifted and the two exchange rates converge, the peso could devalue more than 110% against the US$, leading to higher profits for soy farmers, a Chicago-based analyst said. Consequently, soybean hoarding is likely to be rampant in 2021, stoking tight supply concerns for the crushing industry, he said.
Dry weather is also seen tightening the supply situation in 2021. La Nina, a drought-inducing weather phenomenon, is widely seen limiting Argentinian soybean output to 46 million mt in the 2020-21 marketing year (October-September), down 11% from initial estimates.
Tight supply concerns have already started to impact prices.
The soybean meal FOB Up River outright price was estimated at $503.09/mt Dec. 31, the highest since the assessment launched in Sep. 2019, while the soybean oil FOB Up River outright price ended the year at $1,033.97/mt, its second-highest level since inauguration, according to Platts assessments.
Argentina’s domestic crush is projected at 39 million mt in the 2020-21 marketing year, edging up 0.06% year on year, according to the US Department of Agriculture. While soy meal exports are forecast to fall 2.5% over the same period to 26.7 million mt, soy oil shipments are seen rising 4.6% to 5.65 million mt, USDA added.
Analysts expect the projections to be revised down in coming months due to the constraints faced by Argentinian crushers in 2021.
BRAZILIAN CRUSH MOMENTUM HIGH
In a stark contrast to Argentina, analysts see sustained momentum for a high crush output in Brazil in 2021, despite the soaring input cost of raw beans.
The average price of Brazilian beans is projected to rise over 20% year on year in 2021 due to tight supply, a Goiania-based consultant said. However, the crush volume is likely to remain elevated on high prices and strong demand momentum as the global economy recovers from the pandemic, she added.
The soybean meal FOB Paranagua outright price was estimated at $500.89/mt Dec. 31, the highest since the assessment was launched in March 2020, while the soybean oil FOB Paranagua outright price ended the year at $1056.02/mt, its second highest level since inauguration, according to Platts assessments.
Brazilian national agricultural entity Conab said the country’s crushers faced high demand in 2019-20, with crush estimates at 48.9 million mt, up 10% on year. Domestic crush demand in 2020-21 is expected to remain high at 49 million mt due to a thriving meat industry and higher biodiesel mixture requirements, it added.
Analysts also anticipate stronger domestic demand curtailing exports of Brazilian soy meal and oil in 2021.
Brazil is forecast to export 16.8 million mt of soybean meal and 1.15 million mt of soy oil in 2020-21, down 7% and 9% on year, respectively, according to the USDA’s December report.
The increase in domestic demand for soybean products is based on the expectation of economic recovery in 2021, which should drive soy oil and meal consumption, a Chicago-based agricultural consultant said. Brazilian beef and pork production is expected to rise due to continued strong exports to China and improved domestic demand, he added.
A higher blending mandate is also expected to boost biodiesel demand in Brazil in 2021. The mandate is set to increase to B13 (13% blend rate) in March 2021 from the current B12.
Soybean meal is extensively used in animal feed, while soybean oil comprises over 80% of the vegetable oil used for biodiesel production in Brazil.
Singapore — CFR Northeast Asia corn prices for cargoes arriving between April and May, has surged to a near 2 1/2-month high of $268.25/mt on…
Jan 08, 2021
In the first four days of the new year, Asian corn prices have outperformed last year’s uptrend, extending a climb which began in May 2020. The Asian corn marker had reached its 2020 peak of $263.25/mt on Oct. 27.
The persistent uptrend is due to many factors, but least of all demand.
The futures rally has kept South Korean buyers mum on their private and tender purchases in the past few weeks. The last time feedmillers in South Korea procured a corn cargo was on Dec. 9 when the Feed Leaders Committee booked 65,000 mt from Louis Dreyfus Co. at $235.95/mt CFR for July delivery. The cargo origins were optional first-half June from US PNW or May shipment from South America. Based on the Jan. 6 close of the July CBOT futures contract at $4.94/bushel, the same cargo from the US PNW is valued at least $270/mt CFR Jan. 8, or around 14.4% higher, which explains buyers’ reluctance to make a move.
Freight costs have also firmed tracking the strength in crude oil markers. Panamax cargoes moving from US PNW to South Korea were priced at $23/mt in December, but is currently $2/mt higher, trading sources said. Over at the US Gulf Coast, barge costs in the Mississippi are on the rise and the market is taking this as a signal that demand is also on the rise, a market source noted.
Meanwhile, alternative feedgrain prices are providing corn with additional support. Feedwheat prices are equally strong and the last time it was sold in Asia was on Dec. 16, S&P Global Platts reported previously. A cargo was sold to a Thai buyer at $277.50/mt CFR. Since then, feedwheat inquiries have dried up and it is offered at around $290s/mt CFR South Korea on Jan. 7 for May-June arrival, market sources said.
Front-month CBOT March futures have added 70 cents, or 16.5%, month on month, to settle at $4.94/bu on Jan. 6. Market sources said managed funds are long corn futures by over 350,000 contracts, with about 80,000 contracts added in the past two weeks based on the Commitment of Traders’ report.
In light of the recent rally in grain futures, the CME Group has raised the maintenance margins for the nearby three corn futures with effect from Jan. 6, a company source said. Maintenance margins for March corn futures were raised to $1,100 per contract up from $975/contract with effect from Jan. 6. The May and July corn futures margin was raised to $ 1,050/contract and $1,000/contract, respectively, up from $975. The margin requirements were raised when futures base prices rose and when markets became more volatile. The margin increments are also for soybean meal, soybean oil, wheat, but the biggest hike was for the January soybean futures at $350 to $2,750/contract.
Demand for January shipments has, however, gripped the Asian market in the past week following delays in Argentina. Buyers are scrambling to cover their shorts with Black Sea or US corn, market sources said. Vietnam was reportedly in the market covering prompt shipments with some Burmese corn.
However, it is not clear how many cargoes are affected by the Argentina strikes, which are ongoing since November 2020. Nevertheless, traders are expecting to see more short covering. Argentina’s corn export ban that is due to expire on March 1, 2021 is not affecting new crop shipments, which will start March-April, market sources said. However, the uncertainty of loadings there is keeping many doubtful.
South Asia’s road to recovery post-COVID As South Asia prepares for the new normal in a post-pandemic environment downward pressure is coming from economic uncertainty,…
Feb 04, 2021
As South Asia prepares for the new normal in a post-pandemic environment downward pressure is coming from economic uncertainty, rapid change and high volatility. The markets are in flux.
Therefore, it is vital for you to stay informed and our South Asia Virtual Forum in February will help you gain essential insights, to do just that.
Join us to hear from S&P Global Platts specialists on key critical content that will help you break down complex issues and gain clarity on fundamentals that will impact your business. Let us be your guide.
The forum will allow you to access five different tracks focusing on eight key commodity areas:
London — After experiencing a tumultuous year during 2020, the corn market in 2021 is going to see lower exports from Ukraine, a key producer,…
Jan 04, 2021
The outbreak of the coronavirus pandemic followed by severe droughts within the corn producing regions of the Black Sea and the US, lifted corn prices toward the end of 2020, while volatility plagued the market.
Drop in Ukrainian production resulted in a series of defaults on forward contracts by farmers. Defaults on signed summer offers to supply corn in October through December prompted exporters to cover some of their short positions in the FOB market. As a result, corn prices rose to 6-year high of $239.50/mt on Oct. 27 from this year’s low of $166.75 on Aug. 12. In addition, strong international demand tightened the already constricted market as China imported record volumes of corn. Moving toward the New Year, the trend is unlikely to slow down.
Ukraine has been a major contributor to the supply of global corn. It produced 35.81 million mt during the record 2019-20 season, according to the US Department of Agriculture (USDA).
However, the situation has changed this year due to unfavorable weather conditions undermining the yields. Ukraine experienced a severe drought in the main grain producing regions throughout August and September during which substantial growing of crop takes place.
The production for the 2020-21 marketing year (Sept. 1, 2020 to Aug. 31 2021) is estimated at 29.5 million mt by USDA. This drop in production will result in lower exports for the 2020-21 marketing year. The USDA estimates Ukrainian exports at 24 million mt, a decline of 17% year on year, for 2020-21 marketing year in its December World Agricultural Supply and Demand Estimates.
Ukraine exported 8.34 million mt of corn as of Dec. 23, according to the agriculture ministry, which is 2.63 million mt, or 24% lower than the same period last year.
Ukrainian exports into the EU dropped 56% to 2.06 million mt as of Dec. 20, data from EU crop observatory showed.
Along with Ukraine, lower exports from Russia is also helping boost the prices. Russian exports are expected to drop to 3.1 million mt this year from 4.07 million mt over last season, as per USDA estimates.
According to Platts Analytics, Russian corn production in 2020-21 is estimated at 14.8 million mt. By Dec. 10, Russian farmers had harvested 14.3 million mt of corn from 97% of planted area, according to the Russian agriculture ministry. This compares to a total production of 14.28 million mt last marketing year.
UKRAINE LOSING COMPETITIVENESS
This rise in Ukrainian corn prices have undermined the competitiveness of the Ukrainian origin.
Ukrainian corn is facing strong competition from the US at some destinations while South American origins will enter the market in the second quarter of 2021.
At the same time, international demand remains strong, from China in particular.
Demand for corn in the major consuming countries is likely to see a steady rise in the ongoing year. World imports of corn are expected to rise by 14.25 million mt from the 2019-20 marketing year to 179.57 million mt in the 2020-21 marketing year, according to USDA’s December WASDE report.
China, which has been in the headlines for its higher corn imports is likely to consume 282 million mt of corn in the 2020-21 marketing year, much higher than the last five-year’s average of 248.3 million mt.
China’s imports for the current marketing year is estimated to more than doubled to 16.5 million mt from last marketing year’s 7.6 million mt, as per USDA. However, some market players say this number is still underestimated as China may need to import more corn to restore internal stocks and increase the hogs population, potentially rising to as high as 30 million mt.
Traditionally China has imported large volumes of corn from the US, however recent trade tensions between the US and China have encouraged China to look elsewhere to fulfill their corn demand. But, as the Biden administration prepares to take office in the US, foreign policy relating to China is still unclear, potentially improving US-China relations.
Demand in other consuming regions — Southeast Asia, and the EU is also likely to see a rise this year. Southeast Asia is likely to consume 48.4 million mt of corn in 2020-21, higher than the five-year average of 43.62 million mt. In the EU, consumption is seen at 81.5 million mt, higher than the last five-year average of 78.18 million mt.
US corn production estimates for 2020-21 have fallen by 9.3% in the past six months to 14.5 billion bushels (368.49 million mt).
Amid the lower production estimates in Ukraine and the US, Brazil is expected to enter the international corn market in Q2 2021. For Brazil, the USDA in its December WASDE report estimates 2020-21 production to be at record 110 million mt, around 8 million mt higher year on year.
London — European market participants anticipate that a recent temporary reduction in Turkish rice import tariffs is likely to increase Japonica sales from the continent.…
Jan 11, 2021
The Turkish Grain Board, or TMO, confirmed to S&P Global Platts that the import tariffs on paddy, brown and milled rice have been lowered from 34%, 36% and 45% to 5%, 10% and 15%, respectively, until April 30. While Turkish production in 2020 decreased slightly year on year, the TMO cited the weakness of the lira against the dollar as the primary rationale behind the policy. The lira is 22% weaker against the dollar year on year, as of Jan. 11, and 63% weaker than it was five years ago.
The temporary change in policy is likely to benefit European exporters in particular due to the relatively small window of opportunity to benefit from the policy, in addition to adequate stocks on the continent. According to multiple brokers, inquiries for Italian Baldo rice have spiked in recent days. One such broker remarked that while Turkish buyers had been resisting offers of milled Baldo at around Eur840-860/mt CFR Mersin in the run up to the tariff reduction, buyers are now eager to conclude trade at these levels. Other European origins, such as Greece, are also likely to benefit from the policy.
An additional 25% retaliatory import tariff on US rice remains in place, which is likely to limit sales of Californian medium grain during this four-month window. However, one participant involved in large volume paddy sales to Turkey in the past remarked to Platts that they “don’t see any business happening anytime soon from California to Turkey, even if the retaliatory duty was removed” due to uncompetitive Calrose prices.
While Japonica rice exporters in South America would also typically benefit from this sort of reduction, they are unlikely to this time around due to tight stocks ahead of harvesting. According to a major Uruguayan exporter, Turkish inquiries have increased in recent days, but it is “not possible” for new crop to arrive in Turkey by April 30 and they “have no stock” left to sell.
Due to the increasing price sensitivity in the Turkish market, sellers of Chinese old crop Japonica and Russian Rapan rice will also likely benefit from the policy. While Indian Swarna rice exporters could also benefit, ongoing container shortages in the country are likely to delay execution, making it doubtful that Indian rice could reach Turkey by April 30.