Donald Trump gave the bell on ethanol, to boost corn

The markets are beginning to look at Argentina, which despite having lost relative weight in price formation, retains its influence: it is the third largest exporter of the two major agricultural commodities, corn and soybeans. We will see how it impacts Chicago, which had a rebound this week as a result of a crucial announcement of the president of the United States, beyond the disaster that could cause the European Union if it closes imports of soybean oil and biodiesel.

On his visit to Iowa, Donald Trump communicated his decision to promote the commercialization of gasoline with a 15% ethanol (E15) all year roundincluding summer. Until now, regulatory restrictions were in force, based on the argument that in the warmer months and regions the higher ethanol content could produce smog.

In the United States, ethanol is a structural piece of the agricultural business. But it impacts the global market. About a third of the corn harvest is destined for biofuels and byproducts such as burlanda, which then returns to the system as a key input for livestock farming. This energy anchoring gave the cereal a demand floor that cushions surpluses, reduces volatility and sustains prices in cycles of oversupply. Without ethanol, corn surpluses would destroy prices.

Y would drag down those of soybeans, since there are communicating vessels between both products: farmers, faced with a drop in the price of cereal, would turn to planting more soybeans, increasing future supply. That is why the prices go in parallel, although the greater milling of corn for ethanol also impacts the price of soy protein, since the co-product of fermentation, burlanda, competes with soy flour.

The expansion of E15 is not just an environmental or technological discussion. It is, above all, a economic policy decision. More ethanol implies more domestic consumption of corn, less export pressure at times of record harvests and greater predictability for the producer. That is why the issue goes through Democratic and Republican governments: in the Midwest the debate is not about whether ethanol is useful, but rather how to expand it and give it regulatory stability.

This debate is beginning to resonate strongly in Argentina. Today the mandatory cut of gasoline with bioethanol is 12%produced from corn and sugar cane. However, producers and analysts have been suggesting that A jump to 15% would allow us to replicate, on a local scale, the same virtuous effect as in the United States.: transform exportable surpluses into domestic demand, add industrial value, generate employment and give corn structural price support.

Argentina is a large world producer of corn, but it continues to be a price taker. Every time the international market becomes saturated, the impact is fully felt in the producer’s income. A larger ethanol mandate does not eliminate that dependence, but it mitigates it. And it also provides an additional advantage: it strengthens the livestock chain via burrowing, reduces energy imports and generates industrial activity in the interior. In addition to the environmental contribution, since The carbon footprint of corn ethanol in Argentina is 70% lower than that of the gasoline it replaces.

While in the United States they are discussing how to shield the E15 for the entire year, in Argentina there is a pending task. The cut is stuck at 12%, the lowest in the region. Brazil, since January of this year, went from 27 to 30%, with a growing share of corn, which is proving to be more economical than sugar cane and is growing faster than its harvest, which is expanding at a galloping rate. Thank goodness…

The signal coming from Iowa is clear and It also applies to this side of the map. Above all, when Argentina is deficient in gasoline. Oil refining capacity is insufficient and Increasing the cut would imply savings of more than a billion dollars annually. It’s here and it’s now.