lunes, 30 de noviembre de 2009

EPA May Increase Ethanol Blend to 11%, Morgan Stanley Says

If the US economy becomes more alcoholic, corn demanda will continue to expand to levels more and more difficult to reach without leaving less land for other crops.... Another side of the Malthusian situation.

Nov. 30 (Bloomberg) -- The U.S. Environmental Protection Agency may allow the percentage of ethanol in gasoline to increase to 11 percent, analysts at Morgan Stanley & Co. said in a report today.

The EPA is expected to decide by tomorrow on an ethanol industry request to allow the ratio of ethanol in gasoline to rise to 15 percent from 10 percent. Growth Energy, an ethanol industry trade group, filed the request in March.

“While we are maintaining our long-held view that U.S. ethanol blend levels will ultimately migrate well north of the current 10 percent, we do not expect a material increase in the blend rate as a result of tomorrow’s EPA decision,” Morgan Stanley analysts Vincent Andrews, Robert Wertheimer and Megan Davis wrote.

Raising the blend ratio is a source of contention between the industry, oil refiners and automakers. Growth Energy filed the waiver request to lift demand for an industry that’s been battered by volatile corn and fuel prices. At least 10 companies have sought bankruptcy protection since last year, including VeraSun Energy Corp. and Aventine Renewable Holdings Inc.

The analysts said the EPA could allow refiners to sell gasoline that contains 11 percent ethanol until it determines the impact E-15 would have on engines.

“We would see this as a signal that the EPA is willing to let ethanol blend levels go higher over time assuming that a thorough data analysis concluded that there was no meaningful risks to such action,” Morgan Stanley said.

Court Resolution

The agency could also leave the current blend level unchanged, signaling that it won’t allow the ratio of ethanol in gasoline to surpass 10 percent, the analysts said. The decision is likely to be contested in court, according to the report.

Archer Daniels Midland Co., the second-biggest U.S. ethanol producer, and agricultural companies such as Monsanto Co. and Deere & Co. could surge if the EPA allows the higher formula, the analysts wrote.

Poet LLC, ADM, Valero Energy Corp. and Green Plains Renewable Energy Inc. are the largest ethanol producers.

To contact the reporter on this story: Mario Parker in Chicago at 5927 or

martes, 24 de noviembre de 2009

Oil will not be enough in 2010

Prepare for a barel above US$ 100 by late 2010
World oil demand growth to outpace supply in 2010: poll
On 7:34 am EST, Tuesday November 24, 2009

By David Sheppard and Joshua Schneyer

Reuters -
LONDON/NEW YORK (Reuters) - Growing world oil use will likely outpace the rate of new supplies in 2010, eroding the huge stockpiles of crude which have mounted around the world since the start of the global economic crisis.
According to a Reuters poll of ten top oil-tracking analysts and organizations, oil demand is predicted to rise by 1.3 million barrels per day (bpd) next year to 85.9 million bpd.
At the same time, the rise in production from outside the Organization of the Petroleum Exporting Countries and output of natural gas liquids (NGLs) from OPEC members is seen growing by just 800,000 bpd in total.
Click here for Reuters table of results (ID:GEE5AN0S3)
Click here for a graphic illustrating the changes:
Click here for a spreadsheet on supply and demand "The key question for prices is supply," Barclays C "The key question for prices is supply," Barclays C apital analyst Costanzo Jacazio said.
"2010 is really a bridging year -- if the economies continue to perform as well as they have been doing during the early stages of the recovery, then I think by 2011 we'll be seeing the demand numbers at or above where they were in 2008."
Non-OPEC output is seen averaging 51 million bpd in 2010, up from 50.8 million bpd, while OPEC output of NGLs -- which are not subject to the producer group's production quotas -- are expected to rise to 5.6 million bpd, up by more than 20 percent since 2008.
If OPEC members can maintain current adherence levels to present output quotas, with group output including Iraq assessed around 28.9 million bpd, crude oil inventories could fall by almost 150 million barrels next year.
Demand for OPEC's crude is seen at 29.3 million bpd.
At the end of September, the International Energy Agency assessed oil stocks in the Organization for Economic Co-operation and Development (OECD) at 60 days of forward cover, 120 million barrels above the five-year average.
Doubts surrounding the eventual strength of the economic recovery and how oil demand will respond following the impact of record prices, a global recession and increased environmental initiatives has seen many analysts' views diverge.
Investment banks Goldman Sachs and BofA-Merrill Lynch have the most bullish outlook for demand, projecting 86.4 million bpd and 86.7 million bpd respectively.
Barclays Capital sees demand at 1 million barrels below Goldman's estimate because of increased conservation efforts, but conversely sees non-OPEC supplies 1.1 million barrels lower than its U.S. rival due to falling investment during the crisis.
Deutsche Bank sees demand as relatively weak in 2010, at just 86 million bpd, despite forecasting the world economy will grow at 3.7 percent in 2010 - well above the International Monetary Fund's forecast of 3.1 percent global growth.
"The question is where's the demand growth? Year-on-year figures in the U.S. show demand still struggling," said Adam Sieminski, Deutsche Bank's head of energy research.
"It appears the economic recovery is not coming in energy-intensive or oil-intensive sectors. We may still be seeing people being careful about consumption -- if they have two cars they'll be driving the smaller one."
The expected demand increase in 2010 will be the first year to show average growth since 2007, before record prices and the economic crisis slashed consumption.
Global oil demand has fallen by almost 2 percent since 2007, when average annual consumption hit an all-time high around 86.2 million barrels daily.
The steep drop in demand saw oil prices crash from record highs of almost $150 a barrel in July 2008 to below $33 a barrel in December last year.
Since then prices have more than doubled to just below $80 a barrel as OPEC -- whose member countries pump more than one in every three barrels of oil -- tried to cut output quotas by 4.2 million barrels, or 5 percent of world demand.
Demand growth is expected to be strongest in countries outside the OECD, with China leading the way.
"We see a healthy demand recovery of 1.5 million barrels next year, there's only so much you can contract," said Sarah Emerson, director of Energy Security Analysis Inc. in Boston.
"(Demand) growth in China next year should be significant and the U.S. will go from two years of contraction to growth."
The Chinese economy is expected to grow by around 8 percent in 2009 and may post even stronger growth next year. Implied Chinese oil demand in October was up more than 10 percent year-on-year, customs data showed on Monday.
Inside the OECD, the United States is seen posting a small recovery in demand. But many analysts remain doubtful about the strength of growth with some arguing oil use may never revisit highs of earlier this decade in North America and Europe.
"We're not going to be in an environment when prices will shoot back to anything like $120 a barrel in 2010," Jacazio at Barclays Capital said.
"(But) we still see oil demand growth next year outpacing non-OPEC supplies and NGLs combined."
(Editing by Sue Thomas)

jueves, 12 de noviembre de 2009

Artificial weather

Artificial rain -or in this case snow- is usually mentioned as a way to improve agriculture production, or mitigate the randomness of weather. China as usual moves ahead, but the results are questioned.

Chinese Debate Creation Of Artificial Snow Over Beijing
Wednesday, 11 November 2009
Scientists in China refueled the debate over the practice of tinkering with Mother Nature by artificially inducing the second major snowstorm to wreak havoc in Beijing this season, AFP reported.

The National Meteorological Center said the earliest snow to hit the capital in 22 years fell on the first of November and the capital was again shrouded in white Tuesday with more snow expected in the coming three days.

The Beijing Weather Modification Office had artificially induced both storms by seeding clouds with chemicals, a practice that can increase precipitation by up to 20 percent, according to The China Daily, which cited an unnamed official.

On Tuesday, an official had said the storm was "natural."

Such methods are aimed at alleviating a drought over much of north China -- including Beijing -- that has lingered for more than a decade, city weather officials reported.

Meanwhile, many residents of Beijing have complained about the flight delays, traffic snarls, cancelled classes and other inconveniences of a surprise snowstorm.

Most agree that officials could warn them if they are planning to toy with the clouds.

The paper reported that beyond the day-to-day hassles, experts said the weather manipulation had other undesirable side effects in the longer term.

Xiao Gang, a professor in the Institute of Atmospheric Physics at the Chinese Academy of Sciences, told the paper that no one could tell how much weather manipulation will change the sky.

"We should not depend too much on artificial measures to get rain or snow, because there are too many uncertainties up in the sky," he said.

The more than 5,500 tons of erosive snow-melting chloride used on city roads Tuesday -- nearly half the annual allotment -- could erode steel structures of buildings, according to Zhao Nan, a Beijing engineer, was quoted in The China Daily.

The paper cited official statistics that showed the snow-melting agent was responsible for killing 10,000 trees in Beijing and decimating 2.15 million square feet of grassland in 2005.

State press reports said that despite a massive effort to clear the capital of snow that involved over 15,000 workers, many roads remained blocked, while highways into Beijing and in neighboring Hebei and Shanxi provinces were shut down.

miércoles, 4 de noviembre de 2009

Conservation land goes into agriculture in the United States

3 million acres taken out of conservation program
By ROXANA HEGEMAN, Associated Press Writer Roxana Hegeman, Associated Press Writer –
TRIBUNE, Kan. – Surveying undulating grasslands that disappear into the western Kansas horizon, retired farmer Joe Govert pointed out parcel after parcel no longer enrolled in a federal program that pays property owners not to farm environmentally sensitive land.

The arid, wind-swept ground stripped of topsoil by Dust Bowl storms has laid undisturbed beneath a protective cover of native grasses that took two decades to re-establish under the Conservation Reserve Program. But millions of those acres are being plowed again after the 2008 Farm Bill capped the program at 32 million acres.

More than 3.4 million acres nationwide were taken out of the program in September when the owners' contracts expired. Most of them were in Texas, Colorado and Kansas, but hundreds of thousands of acres also came out in Montana and the Dakotas.

The environmental and economic repercussions could extend beyond the nation's Heartland with a greater risk of new dust storms, soil erosion and water pollution. Farmers also worry more grain will mean even lower commodity crop prices.

CRP pays landowners not to farm easily eroded land, while splitting with them the cost of establishing vegetative cover. The goal is to reduce soil erosion and sedimentation in streams and lakes, improve water quality and establish wildlife habitat.

The program has created millions of acres of habitat for quail, pheasant, prairie chickens and other wildlife and established filter strips and forested buffers to protect streams, lakes and rivers from sedimentation and agricultural runoff.

In return, farmers receive annual rental payments on 10-, 15- and 20-year contracts. With payments averaging $51 per acre per year, the program cost about $2 billion in fiscal year 2008.

Govert, 85, put all his land — about 750 acres — in the program in 1987 and got rid of his farm equipment. His contracts expired last month and for the most part cannot be extended.

With the government checks ending and property taxes and other bills to pay, Govert said he has little choice but to break up the ground to farm again — or sell it to someone who will.

"This stuff has roots," he said as he looked glumly across a field in Greeley County near the Colorado state line. "It is well established. This is what hurts. It took years to get it established."

But much of the land can be farmed again without harming the environment, said Adrian Polansky, director of the Farm Service Agency overseeing CRP in Kansas. Modern agricultural practices, such as no-till farming, curb soil erosion. CRP also gives a higher priority for re-enrolling the most environmentally sensitive acres.

Polansky also noted the program was more about the economy than the environment when Congress authorized it amid the farm crisis in 1985.

"We had producers, landowners, banks, suppliers that were in dire financial straits," said Polansky, himself a third-generation farmer. "So in those early years ... It was in a sense an economic rescue-type program to stabilize land prices."

Still, CRP was criticized early on for hastening the decline of rural towns. With fewer farmers tilling the ground, farm equipment dealerships closed and grain elevators consolidated. Many farmers moved away, and government payments often went to absent landowners.

By the time lawmakers scaled down the program in the latest farm bill, CRP protected 39.2 million acres with contracts expiring between now and 2012.

Bringing the land back into production is not expected to reverse the loss of small family farms: Today's growers can farm vast tracts with modern equipment, seamlessly absorbing new acres into existing operations.

But it could stimulate rural economies, with more sales of fertilizer, seed and other supplies; more business for grain elevators; and lower costs for corn, grain sorghum and other feedstocks used by ethanol plants and livestock feedlots. Lower commodity prices also might help reduce food prices for consumers.

Land auctions are already drawing farmers eager to expand their holdings. Govert said land he bought in 1950 for $55 an acre now sells for nearly $900 an acre, and a recent auction averaged as much as $1,100 an acre.

In some areas, change is in the air — literally. Thick plumes of smoke rise from thousands of acres where native grasses are being set afire in preparation for tilling. Most of those rough acres are expected to be seeded into wheat or grain sorghum, hardy crops that can survive in low quality soils and arid climates.

But even as some farmers expand, many worry about the effect on commodity markets when there's already a global grain glut.

"The timing of this is absolutely horrible," said Vance Ehmke, who farms near Healy in west-central Kansas. "You have all these acres coming out (of CRP) when the bottom has come out of the grain market. All we need is more ground going back into production."