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DECC Doubles Down on Woody Biomass
By Tim Portz | September 03, 2013 On August 22, 2013 the United Kingdom’s Department of Energy & Climate Change released its much anticipated report, “Government Response to the consultation on proposals to enhance the sustainability criteria for the use of biomass feedstocks under the Renewables Obligation (RO)”. The title is certainly a mouthful, but after a few readings of the 52 page document it is clear the DECC intended the report to be its final word on the role that woody biomass would be allowed to play in meeting the nation’s ambitious Renewables Obligation. In a letter included in the annex of the report was a letter signed by a host of biomass industry professionals that asks DECC to not only firmly establish its support for biomass, but to buttress this support with some measure of long term certainty. The ministers at DECC clearly headed this advice and included in their report a commitment to “long term certainty” that deal makers and the investment community were advocating for. Specifically, on page 8 the report states, “ We have also decided to adopt a policy that the UK will no make further unilateral changes in the methodology underpinning the GHG targets or to other aspects of the RO sustainability criteria before 1 April 2027 ”. And so the DECC has spoken. The report establishes that woody biomass will play a significant role in the UK’s Bioenergy Strategy moving forward, but not without robust assurances of adherence to sustainability guidelines. While North American pellet producers, foresters and landowners were certainly aware of, and comfortable that they could achieve sustainability requirements the UK would set forth, the unresolved question hinged on the degree to which this adherence would be verified and reported. While the report establishes that final sustainability criteria will not be announced until the end of the year, so that they may be harmonized with the criteria being established by the European Commission, the report also establishes that once finalized, power producers would be “required to demonstrate that solid biomass and biogas feedstocks meet the sustainability criteria in order to be eligible for support under the RO”. Essentially, if power producers going to participate in the Renewables Obligation and generate Renewable Energy Credits, audits, verification and reporting must become a part of their supply chain program, beginning April 15 2015. By answering this one question, the DECC report introduces many others. Clearly, the finalized criterion that the report suggests will be issued at the end of the year is the biggest question for producers and their supply chains, but that isn’t the only one. As North American pellet producers continue to grow their exports and satisfy UK based demand, creating a chain of custody reporting program that their customers will need will have to become an extension of their production operation. Forest certification, while not widespread in the United States, does have a precedent. Both the Forest Stewardship Council (FSC)and the Sustainable Forestry Initiative (SFI) have established certification programs and are certifying forest acres that later become paper and lumber products, all bearing proof of their certified status. This latest report from DECC confirms that the growth in the export market for North American producers will continue and along with it an industry wide reporting and verification program. Continue reading
Stocks Mixed As Syria Worries Weigh
http://www.ft.com/cms/s/0/78a30882-15dc-11e3-b519-00144feabdc0.html#ixzz2e0jj0PQn By Jamie Chisholm Thursday 10:35 BST. Optimism on the global economy is helping nudge many growth-focused assets higher, but the bullishness is contained by worrying over the potential geopolitical fallout of the Syria crisis and some monetary policy uncertainty. Stronger European financials but weaker energy stocks leaves the Stoxx 600 index barely changed after the FTSE Asia-Pacific index rose 0.2 per cent. US index futures point to the S&P 500 on Wall Street opening flat at 1,653. The dollar index is up 0.1 per cent to flirt with one-month highs, while gold is up $1 to $1,392 an ounce. Underpinning investor sentiment is a recent rash of fairly upbeat economic data. Well-received manufacturing and service sector surveys from China and Europe this week have joined with better US figures – such as buoyant car sales in August – to raise hopes of a broadening global recovery. That has lifted industrial commodities of late, and many are mildly firmer again on Thursday, with copper up 0.3 per cent to $3.25 a pound and Brent crude adding 48 cents to $115.39 a barrel. However, oil is also getting support from wariness about the chances of supply disruption should the US attack Syria. The potential for broader political fallout following any such action will be in focus as the G20 meets in Russia, which supports the Damascus government; and fretting over this issue is likely to be suppressing the broader market’s confident tone. China’s vice finance minister has warned that a military strike on Syria would hurt the global economy, and Turkey’s lira, which has been buffeted of late by Syria-linked and emerging market tensions, is 1.3 per cent weaker to trade at a record low of TL2.075 per dollar. Also causing some reticence is possible monetary policy “headline risk”. The session sees strategy announcements from the central banks of Japan, Sweden, the UK and the eurozone – a lot for traders to absorb. Labour market data from the US – in the form of the weekly initial unemployment claims and the ADP private sector jobs survey – will set the scene for Friday’s non-farm payrolls numbers, a report considered crucial in formulating the Federal Reserve’s decision on when to start reducing its bond buying programme. “We expect this Friday’s employment report to seal the deal on a September tapering announcement,” said analysts at Société Générale. US implied borrowing costs are consequently moving up, pulling other highly-rated sovereigns along in their wake. The 10-year Treasury yield is up 4 basis points to 2.93 per cent, flirting with two-year highs, while equivalent duration Bunds are advancing 6bp to show 2.0 per cent for the first time since March 2012. Japanese benchmark bonds are up 1bp at 0.79 per cent after the Bank of Japan concluded its two-day meeting, leaving rates and its asset purchase programme unchanged. In an upbeat statement, the BoJ lifted its assessment of Japan’s economy, which it said appeared to be “recovering moderately”. The yen briefly moved above Y100 versus the dollar, but is now changing hands at Y99.85, just 10 pips weaker on the day. After gaining 5 per cent so far this week, the Nikkei 225 has similarly decided to take time for consolidation, closing up just 0.1 per cent. In Hong Kong, the Hang Seng index was up 1.2 per cent, but on the mainland the Shanghai Composite was down 0.2 per cent, highlighting a mixed session for the region. Australia’s S&P/ASX 200 index lost 0.4 per cent after figures showing a greater than expected trade deficit for July. On the back of below-forecast mineral exports, the deficit reached A$765m after a modest surplus of A$243m in June. “There is nothing here to challenge the growing view that mining investment has already peaked, with little signs of a pick-up in other sectors so far,” said economists with TD Securities. Australia holds its federal election on Saturday, where the opposition Liberal Party candidate is expected to win. The Aussie dollar is seeing some profit taking after bouncing 3 per cent in the past three sessions on reduced expectations for easier monetary policy following stronger than forecast second-quarter GDP data. The Aussie is weaker by 33 pips to US$0.9133. The Indian rupee is moving further away from record lows as the market perceives greater credibility in the Reserve Bank of India’s new chief. Confidence in Raghuram Rajan’s measures to support the currency sees the dollar fall 1.4 per cent to Rs66.14, nudges bond yields lower and has helped boost the Sensex equity gauge by 2.3 per cent. Additional reporting by Sarah Mishkin in Hong Kong Continue reading
Brazil’s Booming Farms Reap Benefit Of Weak Currency
http://www.ft.com/cms/s/0/aab8e412-0dae-11e3-9fbb-00144feabdc0.html#ixzz2e0fynxYQ By Joe Leahy in São Paulo Carlos Piassi remembers the reaction from other farmers when he started planting a second annual crop at his farm near Uberlândia, in Brazil’s grain belt. No one believed it could be done given the semi-arid region’s relatively short rainy season and long dry winter. “If you had said you were going to plant a safrinha [the small harvest] here five years ago you were called crazy,” he says at his farm, Fazenda Campo Alegre. The naysayers were wrong. “The safrinha between last year and this has about tripled,” he said. That Brazil has risen in recent decades to become an agricultural power is no secret. It dominates the sugar, coffee and orange juice markets and competes with the US to be the world’s biggest soyabean exporter. What is less understood is that the transformation is not only continuing, it is gaining pace. Indeed, Brazil’s robust agricultural sector is promising to help Latin America’s largest country weather one of its toughest economic periods in a decade as a consumer-driven boom slows. And a recent 15 per cent plunge in the value of its currency, the real, against the dollar is set to give further impetus to the sector by reducing rising costs that were making its exports uncompetitive. “The devaluation of the real has been a complete game-changer,” said Giovana Araújo, an agribusiness analyst at Brazil’s Itaú BBA bank. Using new varieties of seeds that have allowed them to shorten soya and corn crop cycles, Brazilian farmers in the country’s centre-west savannah areas have moved from planting one crop to incorporating the second, the safrinha. In some areas where irrigation is available they are even contemplating a third harvest. The corn crop has benefited most from the safrinha. In the 2012-13 year, corn output is expected to total nearly 80m tonnes, up from about 56mt in 2011. Soyabeans, meanwhile, are estimated at more than 80mt compared with about 75mt in 2011. Brazilian agriculture output Agroconsult, a Brazilian consultancy, expects the safrinha to account for 56 per cent of total corn production in the 2012-13 season, and 58 per cent in 2013-14 – leading farmers to joke that the second crop should now be called a “safrão”, or “big harvest”. “The safrinha’s share of total production should continue to grow in the long term,” said Marcos Rubin, an analyst at Agroconsult. The new seed varieties mean that the first crop, typically soyabeans, can be planted and harvested in 90-95 days to make way for the second harvest, typically corn, before the summer rains end. After the rains, during the long dry period, some farmers are starting to experiment with a third crop using irrigation. “Brazil has the conditions to quickly double its production of corn, which today is about 80m tonnes to 160m tonnes,” said Roberto de Rissi, business director of Dupont Pioneer, one of the multinationals fighting for Brazil’s increasingly lucrative seed business. If you had said you were going to plant a safrinha [the small harvest] here five years ago you were called crazy – Carlos Piassi, Brazilian farmer Dupont, which is strong in Brazilian corn, has recently also invested in a new facility in the region near Mr Piassi’s farm with the capacity to produce 80,000 tonnes of soya seeds a year. It is fighting Monsanto, Dow AgroSciences and Syngenta for the country’s corn and soya markets. The companies have names for their products that range from Intrasect to Powercorn to Smartstax, a genetically modified insect-resistant variety. The dominance of the multinationals has turned Brazil into a stronghold for genetically modified crops, which account for 90 per cent of its soya-planted area and 76 per cent of corn, according to Jefferson Carvalho, an analyst at Rabobank International. “This year Monsanto launched the first soyabean that was developed specifically for another country, not the US,” he said. Challenging the rapid growth of Brazilian agriculture are the country’s poor logistics, which lead to bottlenecks at roads and ports and higher costs. In addition, recent falls in international prices for grains are squeezing farmers’ margins, though the weaker currency will be a big help. Brazil’s strong economy in recent years has also made it hard to find workers willing to toil in the fields when they could be doing a cushy service job in a city. “Today it’s hard to find anyone who wants to work. I can’t find a driver for the truck,” says Mr Piassi. “I’ve got two corn harvesters sitting idle because I can’t rustle up anyone to operate them.” Continue reading
