Viewing a thread - State of Ag today, Economy, Energy, Ethanol and Corona Virus

So there are a lot of issues out there right now.

With the Daily Virus count still exploding higher.. many of our medical experts on the coasts are calling for more intensive efforts to quarantine.

Director of Harvard Global Health Institute calls for national quarantine NOW and warns 'many more people will die' if we wait any longer.

https://www.dailymail.co.uk/news/article-8121609/Director-Harvard-Global-Health-calls-national-quarantine-NOW.html

Kansas Governor Kelly has issued a state wide "Stay at home order."

https://governor.kansas.gov/governor-kelly-issues-temporary-statewide-stay-home-order-in-ongoing-effort-to-combat-covid-19/

However, I assume that everyone still wants to eat.

American Farmers have about a 10 week window left to plant about.. 230 million acres ( 95 myn Corn, 84 myn Soybeans, 12.8 myn Spring Wheat, 13 myn Cotton, 6 myn Sorghum, 3 myn Barley, 2.5 myn Rice, 2 myn Canola and about 11 myn other crops)

Last year we came up short about 20 million acres due to the Weather.. this year the Weather could be easier to get along with.. though we are still trying to harvest some acres in the Dakota's.

This year we will have to also do it with a Virus Pandemic.. Can we get supplies.. parts, seed, fertilizer, chemicals, workers etc. There is no doubt that cases will grow and the epidemic is spreading. On a personal note my county reported it's first case yesterday.

Will it take the National Guard to escort workers or fill jobs.

My Neighbor runs a custom forage cutting operation. He runs about 3 cutters and a pusher Tractor and about 20 trucks going back and forth. He had like 25 Visa's and got like 3 workers in..

He has a job to put up wheatlege for a Dairy in Texas starting next week.. For now he is going to lean on hired trucks and friends and family to get it done... It will be a challenge. Those Cutters DRINK Diesel Fuel and parts.. everyday. So do the Semi's.

Setting those challenges aside for now..

Everyone is up in Arms about Energy.. Energy policy and Ethanol.

Most of the threads I've seen below do not understand the BASIC Economic's of how Gasoline is blended with Octane in this Country. So I will Start with this example I posted from Last Fall. As noted Unblended Gasoline or BOB runs low on Octane at 83 and was trading at a premium to ethanol which has an octane component of 114. Ethanol @ $1.33 (again thanks to the Illegal Small Refinery Waivers ethanol was under attack by Big Oil) shows GREAT VALUE given it's Octane properties.

At that time alternatives to Ethanol were quite a bit higher in price and offered lowered Octane properties.

With the INCREDIBLE Drop in Ethanol prices.. I can't imagine that this has changed much. Given also that most of the Octane alternatives.. The Aromatics BTX components are Carcinogenic and others such as MTBE are Toxic. Methanol is made from Natty Gas and as that industry is attacked by low prices.. the Shale Drillers will probably be shutting down driving US Natty Gas supplies lower.. and hence Natty Gas products higher over the longer term.

So there Really isn't an economical alternative to Ethanol in the marketplace. Furthermore, not only are they more COSTLY but they are CARCENOGENIC and offer UNACCEPTABLE HEALTH RISKS to the Public.

The Oil Industry likes to say that Ethanol corrods engine parts.. truth be told when the Ethanol Industry looked at it's alternatives.. it found that they were WORSE than Ethanol.. (crickets from the Oil Lobby.)

https://fixourfuel.com/overview/

Today’s gasoline contains, on average, 25 percent aromatic compounds. According to the U.S. Department of Energy, the current gasoline pool is estimated at 135 billion gallons sold annually. With 25 percent being aromatic compounds, that means about 30 billion gallons of aromatics are used each year.

Yes, ethanol can provide a clean octane source to gasoline, reducing the need for aromatics. Ethanol offers twice the octane increase when simply added to gasoline compared to any other gasoline component, making it also the most economical choice. Right now most gasoline in the United States has 10% ethanol in it. That alone replaced 7.2 billion gallons of aromatics in 2017.

See what Ethanol vs it's alternatives do to a Styrofoam cup in the Small Engine section. (I thunked Ethanol was BAD for Small Engines.. turns out Non Ethanol blends are WORSE!!)

Okay so now that we've set the record straight.. (ps also research how many LIVES we can SAVE from Cancer and other Cleaner Air Ailments by including Ethanol in our gasoline.)

Now that we live in an environment where people could suffer damaged lungs from Corona Virus.. do we Really want to go back to the Smog that filled our Cities.. and fills the Cities of Thrid world Countries which DO NOT BURN ETHANOL in their gasoline? Mexico City, Beijing.. etc.

Nope.. We're not Going back to that.

...

The Crude Oil Price War.. was started by the Saudi's in response to the Russian's not wanting to limit supply anymore.. okay,.. we'll then here ya go.. BOOM! The Fact that the Iranians who Attacked the Saudi's last September.. damaging their Crude Oil Infrastructure.. is ALSO hurt.. is probably a happy coincidence on the part of the Saudis viewpoint.

https://www.reuters.com/article/us-saudi-aramco-attacks-iran-special-rep/special-reporttime-to-take-out-our-swords-inside-irans-plot-to-attack-saudi-arabia-idUSKBN1XZ16H

Needless to say.. this price War is probably better than a Hot War.. when the prices of Crude would no doubt be going higher.

What will the US Response be?

President Trump says there is one coming.. https://www.reuters.com/article/us-global-oil-trump/trump-says-he-will-enter-saudi-russia-oil-fray-at-appropriate-time-idUSKBN216366

MARCH 19, 2020

WASHINGTON (Reuters) - U.S. President Donald Trump on Thursday said he would get involved in the oil price war between Saudi Arabia and Russia at the appropriate time, saying low gasoline prices were good for U.S. consumers even as they were hurting the industry.

Saudi Arabia and Russia have been fighting over oil market share after their three-year agreement to hold back production collapsed this month. Their pumping of crude oil flat out during a time of severely reduced global demand due to the spread of the coronavirus has pushed crude prices to near 20-year lows this week. [O/R]

“We are trying to find some kind of a medium ground,” Trump told reporters at a White House news conference, adding that he had spoken to several people about the dispute.

“It’s very devastating to Russia because when you look at it, their whole economy is based on that and we have the lowest oil prices in decades so it’s very devastating to Russia. I would say it is very bad for Saudi Arabia but they’re in a fight, they’re in a fight on price, they’re in a fight on output. At the appropriate time I’ll get involved,” he said.

Russia’s economy is more diverse than Saudi Arabia’s and less dependent on oil than the kingdom’s.

Time to punish Russia, Saudi Arabia?

The Trump administration has already moved forward with plans to fill up the nation's emergency stockpile by purchasing vast amounts of crude from small and medium-sized US producers.

The Energy Department plans to ask Congress for funding to buy tens of millions of barrels of oil , which will come very cheap given the crash in prices.

US officials are also exploring a diplomatic effort to get Saudi Arabia to stop flooding the market with cheap oil and cut production instead, The Wall Street Journal reported. The Trump administration is also considering sanctions on Russia aimed at stabilizing prices, the paper said.

However, a person familiar with the matter told CNN Business there is no movement to impose sanctions on Russia.

Russian officials suggested on Friday that Trump shouldn't get in the middle of this fight.

"We know that the huge US oil sector is now in distress because of these prices," Kremlin spokesperson Dmitry Peskov said on a conference call with reporters. "There are no price wars between Russia and Saudi Arabia....We have good partnership relations with Saudi Arabia, and we do not think that anyone should intervene in these relations."

Texas could cap production

But there are risks involved with a more heavy-handed intervention, including undercutting America's role as a champion of free markets in what is a cartel-driven oil industry.

For instance, Texas regulators are reportedly considering imposing limits on the state's oil production. The Railroad Commission of Texas, which despite its name regulates much of the state's energy industry, hasn't used that power in more than 40 years.

The goal would be to ease the devastating supply glut by cutting output in the epicenter of America's shale oil boom. The Permian Basin of West Texas is the nation's largest oilfield, accounting for the vast majority of skyrocketing production.

Yet production limits would defy the oil industry's free-market ethos -- and do little to solve the destruction in demand caused by the coronavirus outbreak.

"While I am open to any and all ideas to protect the Texas Miracle, as a free-market conservative I have a number of reservations about this approach," Wayne Christian, the Railroad Commission's chairman, said in a statement Friday. "Texas does not operate in a vacuum. If we prorate our oil, there is no guarantee other nations, or even states will follow suit."

And the influential American Petroleum Institute, the oil industry's biggest lobby, opposes such restrictions by Texas.

"We shouldn't abandon our principles during difficult times. We should be an example to the rest of the world about free market capitalism," Frank Macchiarola, the API's senior vice president of policy, economics and regulatory affairs, told CNN Business.

If anything, installing production limits would be taking a page out of the playbook of OPEC, the 15-member organization that essentially acts as a cartel by coordinating production to influence prices.

"We would now be adopting their style of governance," Macchiarola said.

Tariff Man to the rescue?

Goldman Sachs warned that production caps would fail to offset the severe decline in demand caused by airline shutdowns and travel restrictions.

Such policies "would simply replace OPEC's artificial price support policy with another, further pushing investors away from a sector that has already destroyed significant amounts of capital," Damien Courvalin, head of energy research at Goldman Sachs, wrote in a client note Thursday.

Some have even called for Trump, who has referred to himself as "Tariff Man," to impose tariffs on oil from Russia and Saudi Arabia.

And the Domestic Energy Producers Alliance, a coalition of US oil and gas producers, is pushing for the Trump administration to launch an anti-dumping investigation into Russia and Saudi Arabia for "oil price manipulation."

The group, led by oil billionaire Harold Hamm, filed a petition with the US Commerce Department last week to consider duties on oil from Russia and Saudi Arabia.

"This is a direct attack on U.S. oil and gas producers," Hamm wrote in a statement. "They are taking advantage of this coronavirus pandemic that is sweeping the world to focus on this industry and to devastate it."

There could also be political obstacles involved with intervening on behalf of oil producers.

The plunge in oil prices has driven gasoline prices below $2 a gallon in at least a dozen states. That's a rare bit of positive financial news at a time of rising unemployment and cratering financial markets.

Probably the Trump administration will roll out something.. Tariffs? Who Knows? Possible.. Will he allow the Texas RR Commission to do some kind of deal where KSA, OPEC, Russia and the Tx RR Comm do like a 10% cut in production?

I don't know.. not my problem to solve..

I do know that ANY AID coming to the Oil Patch will ALSO be coming to the Ethanol Sector as we play a VITAL ROLE in keeping our Air Clean.. our Economy Growing and Domestic Energy Supplies plentiful.

...

A side Benefit of Ethanol is that Ag was already running.. we have about 6 billion bushels of Corn in Hot Idle waiting to go to an ethanol plant.. if need be we can live off of stocks for a short period of time.. until we got on top of the pandemic. Imagine where we could have been without these supplies..

The Renewable Fuels Standard Calls for 15 billion gallons of Domestic Ethanol to be blended into the Nations fuel supply.

If that is amended.. no doubt concessions will be made to producers.

The Midwest fought for and won a Court Ruling which REQUIRES the EPA to STOP BREAKING THE LAW in issuing ILLEGAL SMALL REFINERY WAIVERS.

This is settled.. even though it is being appealed by parties who illegally benefited from it.. it will stand.

RINs are now back on the rise.. which are the PENALTY for NOT USING CLEANER ETHANOL to blend with. IF Ethanol production falls too much.. RINS will go up.. AS THEY SHOULD..

THE ETHANOL INDUSTRY WILL BE FOCUSED ON HOW THIS IS HANDLED and Midwest VOTERS WILL BE KEPT INFORMED as Decisions are made.

ETHANOL is here to stay.. we are NOT going back to Dirty Air.. especially now in the Age of Corona Virus.

Today.. Ethanol blending economics look something like this..

As you can see.. Ethanol for all it's benefits will have minimal impacts at the pump..

There's alot of hysterical.. it's time for calmer heads to prevail.

This is my opinion going forward.

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