A 24% decline in the Soy/Corn futures ratio is alerting U.S. farmers to grow less Soy as the U.S. plans to implement a permanent E15 waiver for ethanol year-round. In Europe, the Mercosur agreement aims to double ethanol import quotas to 650,000 tons from 200,000 tons. Meanwhile, Brazil's ethanol production from corn for 2023/24 has increased by 22% to 7.2 billion liters, potentially allowing it to export its more environmentally friendly sugar-cane ethanol to both the U.S. and the EU. It is important to note that ethanol is integrated into the Renewable Fuel Standard (RFS) in the U.S. and the Renewable Energy Directive (RED) in the EU. It is challenging to precisely evaluate how these new policies will affect the nested biodiesel mandate in 2025, but they confirm a policy trend toward reducing the use of crop-based vegetable oils, with Indonesia being the only market exception. Notably, corn prices are rising while soybean prices continue to fall as Brazil's real strives to remain competitive against a growing soybean inventory and another large crop in South America possibly reaching 230 Mil M. The USD/BRL exchange rate has reached 6.29 today, indicating significant devaluation against the USD, but more importantly, the Real/CNY exchange rate has fallen to 1.15, showing that the Brazilian real remains strong against the CNY indicating possible further volatility. Noting that today the USD/CNY has reached a five-year high of 7.29.
