An Ag Question, from Jim Sogi

January 9, 2014 |

 Are the low prices in ags related to the drop in oil since oil is used for fertilizer to grow ags?

Jeff Watson writes: 

Partially, but the crops have been very robust worldwide, there's lots of supply, and remember that we're coming off of a major bull market in ags that started in 2007. That explains some of the gravity as for the past 5 months, one has been able to sell any strength in the grains and make money. This market behavior almost reminds me of the 80s. Since during this bull market, farmers have added enough storage to make many elevators redundant. Sometimes, if you watch the front month of wheat or corn, it will be up a couple of cents while the rest of the grains are down a few cents. That's the grain companies trying to shake some of that stored grain loose from the farmers. One can make money off of that.

Jack Tierney writes:

Maybe this is part of the reason, from the president.

U.S. EPA modified its proposed 2014 renewable fuel standard rule last year after the White House raised concerns about production targets being too high and based on unreliable analyses, according to documents from interagency reviews of the draft proposal.

EPA's proposed rule released in November calls for the first-ever reductions in the amount of conventional, corn-based ethanol and advanced biofuels that refiners must blend into gasoline. Its release shook markets for corn and energy and alarmed biofuel producers scrambling to secure investments.

The rule would require refiners this year to blend 15.21 billion gallons of renewable fuels into petroleum-based fuels — lower than the 18.15 billion gallons that Congress anticipated when it wrote the RFS into statute in 2007.


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