I can't believe these guys ever got a job at a bank! I don't even understand why a bank would have exposure to ethanol that requires hedging??? Even if they did for some weird reason you would think someone who understood the market would be hedging it, not some punk kid who just got smoked out of his live cattle position! Why is a bank trading live cattle???
I'm not sure I understand your question. The final RFS rule for 2013 has been announced a while ago with a 13.8 Bgal implied D6 mandate. (http://www.epa.gov/otaq/fuels/renew...s/420f13042.pdf). US corn harvest is huge this marketing campaign. The EPA released its RFS proposed rule for 2014 (http://www.epa.gov/otaq/fuels/renew...s/420f13048.pdf), setting the implied D6 mandate at 13.01 Bgal, that is lower than the mandate for 2013 and much less than the original target at 14.4 Bgal. The EPA explained that (bluntly speaking) it reduced the D6 target due to constraints on the supply of higher ethanol blends to the vehicles. Now, if we leave the rule side aside, one can see a self-enforcing system to for US blenders to add ethanol in their mix. That is when there are not enough RINs generated (ethanol produced) that drive RINs prices higher. And, ethanol blenders are thus better off to generate the RINs themselves (and pass on the cost to final consumers ...) rather than buy RINs on the second market. Someone above commented that that whole RFS story is unclear. I agreed. It is not complicated per se but it is vast and hard to step in. And, I've come across many bad reporting in professional information system such as you know what I mean. Be aware of that*