This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at [email protected] or 843-540-4540.
Soybean oil was the star of the show Friday and Monday. It traded up the limit on Friday and then again moved another limit higher on Monday. The EPA released their much anticipated Renewable Volume Obligation (RVO) proposal on Friday and the volume was much higher for biomass-based diesel than the market had expected. At least one major news wire had reported a rumor that the number was going to be lower so the surprise really shocked the market and led to the big market reaction. There were also proposed rules for penalizing gallons that used imported feedstocks which is another boost to domestic soybean production. So soybean oil led the charge higher and pulled beans along with it. Crush margins had been trending lower for a few weeks now but have shot back higher supporting domestic crush and bean demand. We will consider this a win from the administration and say better late than never. Now we need the 45z rules to help ethanol and a ruling on the small refinery exemptions. On Monday, we also got the May NOPA crush report. It showed we set another monthly record for crush in May blowing last years record out of the water. Despite the new record crush for May, soybean oil stocks were solidly lower than expectations and fell to a 21 year low. Soybean exports may be moving lower, but we continue to increase domestic demand and are finding demand for the oil.
It was unclear why the Saudi’s and other OPEC nations agreed to keep production up in the face of softening demand during Trump’s trip to the middle east a few weeks ago. Isreal’s strike on Iran may have been the reason but neither the market nor Iran knew it was coming. Oil was up on Friday but closed off the highs and actually closed lower on Monday after it was reported Iran was asking for a deal to stop the attacks. There was a lot put in motion ahead of the attack to keep it from disrupting global energy markets.
Corn and wheat continue to come under selling pressure. Corn closed close to the old lows on Monday and desperately needs to hold that support. Funds continue to sell and weather continues to look non threatening. Everyone is bearish and the funds still pile on. There is also positioning ahead of the all important June 30th Quarterly Stocks and Planted acreage report. If the market does not show any life ahead of the report, we may have it priced in by the time we see the numbers. If we get some kind of bounce ahead of the report, producers need to be selling.
USDA released planting progress and crop condition reports Monday at 4pm. Corn conditions improved 1 point from last week to 72% good/excellent vs 71% expected. That is the same last year this week. Soybean conditions came out at 66% good/excellent vs 68% expected. That is down 2 points from last week and 2 points below last year. Winter wheat conditions also dropped 2 points from last week to 52% good/excellent compared to 49% last year. Soybean planting was estimated at 93% complete vs 95% expected. That compares to 90% last week, 92% last year and we are now 1 point behind the 5 year average of 94%. Soybean planting has slowed dramatically as it was more than a week ahead of the average earlier.
Markets will continue watching weather, geopolitical headlines and positioning ahead of the all important June 30th reports.