No Bull | The Five Spot

5 | The Top Five

Lovely to see that we now have two countries that produce more than 80% of the world’s palm oil now in the United States’ used cooking oil import origin top five… as the United States continues to import record amounts of waste oils, fats and greases to be used as feedstocks for biomass-based diesel production.

4 | A flood

Through August, the U.S. has imported 3.2 billion pounds of used cooking oil - more than in all of 2023 and up 102% year-on-year. To put it in perspective - we have imported enough UCO thus far in 2024 to replace/displace the oil from more than 272 million bushels of soybeans (aka Missouri’s entire 2024 crop).

Imports from China continue to dominate at a 57% share.

Imports will only continue to grow, especially as the calendar flips to 2025 and the import of finished biofuels is no longer subsidized via a blender's tax credit. 

Instead, the U.S. likely sees continued exponential growth in low-CI feedstock imports with the implementation of the IRA's 45Z tax credit - subsidizing the production of biomass-based diesels on a sliding scale with fuels produced from low-CI feedstocks commanding a higher credit than virgin oil feedstocks like that of soybeans.

3 | Well-stocked

Although October's WASDE marked the fourth consecutive monthly reduction in U.S. corn ending stocks (both old crop and new), 2024/25’s estimated 13.3% stocks/use ratio is a 5-year high, which has pushed prices to a 5-year low.

No denying this (inverse) correlation:

2 | Cause & Effect

Managed money has been a big buyer of corn from late August through the first full week of October, covering their shorts to the tune of 1.17 BILLION bushels during that window. Unfortunately, Dec futures moved a mere 35 cents during that time…

Here is the (predominant) cause:

Jun 1 on-farm stocks were up 37% year-on-year, resulting in a summer puke of more than 2.25 billion bushels from Jun 1 to Sep 1.

Effect:

That epic puke has acted as a wet blanket on the market, especially heading into a record-yielding crop.

This year-on-year comparison of managed money’s net position alongside futures illustrates the point well:

1 | One lingering problem

Low water conditions continue to plague the inland waterways system. Barge draft and tow size restrictions tie up more barges for longer, slowing the flow of corn and soybeans to Gulf exporters while driving transportation costs higher, ultimately reducing U.S. competitiveness in world markets.

It currently takes six barges at 9’ drafts to transport the same amount of bushels as four barges under normal conditions. The reductions add up quickly as it takes 50% more barges to transport the same amount of bushels. 

Additionally, tow size restrictions remain in place making each trip up and down the river even less efficient as each boat is only able to push a maximum of 20 barges, down from 25 in normal conditions.

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Thanks!

On the date of publication, Susan Stroud did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.