By Kirk Maltais
--Wheat for July delivery rose 5.6% to $7.34 1/2 a bushel, on the Chicago Board of Trade on Wednesday, after the USDA's Crop Progress report showed sizable cuts to the quality of U.S. crops.
--Corn for December delivery rose 5.2% to $6.28 3/4 a bushel.
--Soybeans for November delivery rose 2.6% to $13.77.
HIGHLIGHTS
Sizable Slip: Grain futures reacted to the USDA reporting big drops in the amount of planted corn, soybeans, and wheat in good or excellent condition. The agency says that 55% of the corn crop is in that bracket, compared to 61% last week - or 70% at this point last year. Soybean crop ratings fell 5 points to 54% in good or excellent condition, and wheat fell 9 points to 51% good or excellent. The size of the drops surprised traders. "Key is early next week's U.S. Midwest weather - should be dry and warm until then," said Steve Freed with ADM Investor Services in a note. "Look for next week's crop rating to also decline."
Future Results: With drought conditions all over the U.S. Corn Belt, grain traders are piling in risk premium - with concerns that the dry conditions will adversely impact crop yields. In a note, research firm AgResource says that it's anticipating increased acreage abandonment by farmers, with ending stocks expected to dwindle - with corn stocks potentially declining by over 600 million bushels.
Disappointing Decision: Soyoil futures trading on the CBOT fell limit-down - dropping 4 cents a pound, or 6.7%. The chief factor for the decline was the EPA's decision on renewable fuel volume obligations - which it left largely unchanged for the next two years. It's bad news for the oilseed processing industry, with $5 billion to $6 billion in new investments announced since 2021, said the National Oilseed Processors Association in a statement. "We are disappointed with the lower-than-expected volumes…which don't reflect the significant investments that NOPA members are making," said NOPA President Thomas Hammer. NOPA adds that soybean crush capacity is expected to grow by over 30% through 2026.
INSIGHT
United Disagreement: The EPA revealed this morning their targets for the blending of renewable fuel through 2025 - sparking a negative reaction from the ethanol and biofuels sectors. The new EPA mandates slightly raise the 2023 biofuel blending volume from its previous proposal, but actually drops from previous proposals for 2024 and 2025. Ethanol blending is put at 15.25 billion gallons for 2023, with the mandate at 15 billion gallons in 2024 and 2025. The EPA's goals are too modest to really stifle climate change, said the Clean Fuels Alliance America. "The industry responded to signals from the Biden administration and Congress aiming to rapidly decarbonize U.S. fuel markets…and make clean fuels available to more consumers," said Kurt Kovarik of the Clean Fuels Alliance. "The volumes EPA finalized today are not high enough to support those goals."
Losing Steam: Hot and dry weather is expected to impact wheat production in Russia, said SovEcon in a note. The firm said that it now forecasts production at 86.8 million metric tons, which is down from 88 million tons forecast previously. "Over the past month, rainfall in these three regions has reached only 20-60% of the normal levels," said the firm. "As a result, moisture reserves in both the topsoil and subsoil are currently below average." Even so, SovEcon maintains that projected wheat yield is expected to remain 5% above the five-year average.
AHEAD
--The EIA will release its weekly ethanol production and stocks report at 10:30 a.m. ET Thursday.
--The USDA will release its monthly livestock slaughter report at 3 p.m. ET Thursday.
--The USDA will release its weekly export sales report at 8:30 a.m. ET Friday.
--The USDA will release its monthly cattle on feed report at 3 p.m. ET Friday.
--The USDA will release its monthly cold storage report at 3 p.m. ET Friday.
Write to Kirk Maltais at kirk.maltais@wsj.com
(END) Dow Jones Newswires
06-21-23 1556ET
