Demand Signals
The ethanol industry was not cheering the EPA’s announcement to increase the Renewable Fuel Standard in 2019 by 3%. This is considered a hollow gesture if the EPA does not address the small refinery exemptions which effectively sets the requirement for corn-based ethanol well below the 15 billion gallons that farmers were hoping to be at. Bottom line: Don’t count on ethanol to suck a lot more corn out of the US market next year.
Supply Signals
US crops are generally in good condition after a hot, dry May through the corn belt:
USDA’s June 24 report has corn in 18 states at 77% good or excellent, well ahead of 2017. Soybeans were at 73% good or excellent, also well ahead of last year. A lot of that can be credited to the higher topsoil moistures: we were sitting at 74% adequate or surplus on June 24 compared to 69% last year.
Feed Deals
We are seeing increased consolidation in the Asian feed business. Gold Coin, a Singaporean company with annual capacity of around 2.5 million tonnes, is being sold by its Swiss owners, according to Bloomberg. Offers in the $500 million region are expected to come from large international players. Bloomberg reports that there have been over $1.1 billion in ag-related deals in South-East Asia this year already. Shares in large feed producers PT Japfa Comfeed Indonesia and PT Charoen Pokphand Indonesia have each risen more than 20 percent in Jakarta trading this year. Private equity firm KKR & Co. bought about 10 percent of Japfa Comfeed in 2016 and a $150 million stake in Vietnamese animal-food producer Masan Nutri-Science Corp. last year. Affinity Equity Partners plans an IPO for Malaysian poultry producer Leong Hup International this year.
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