Crop Progress & Biofuels Update

Yesterday, the grains complex came under selling pressure following improved US weather forecasts. ​NOAA forecast above-normal rainfall and normal temperatures over the next 8-14 days. ​There have  been concerns that warm, dry weather in the US would negatively impact the crops which was reflected in the USDA's laterst crop progress report.

This showed that 68% of the US corn crop is rated good to excellent, compared to 72% the previous week, and 71% for the same week last year. For soybeans, 62% of the crop is rated good to excellent, compared to 67% last week and 72% at the same stage last year.

Biofuels Update
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In May, there were reports that the The U.S. Environmental Protection Agency would be keeping biofuel blending mandates the same this year as they were last year. That would spare the U.S. refining industry the added costs associated with the usual annual expansion in renewable volume obligations under the Renewable Fuel Standard. THis comes at teh expense of the biofuel producers and the corn industry which depend on regular increases to grow their businesses. 

The RFS requires refiners to blend billions of gallons of biofuels like corn-based ethanol and biodiesel into their fuel, or buy tradable credits from those that do. The amount of biofuels typically increases each year with the objective of reducing foreign petroleum imports and also to help farmers.

However, there have been developments recently in the biofuels market with reports that the US government is discussing the possibility of providing some relief to refiners on the biofuel blending mandate. This has created some uncertainty which has weighed on corn and soybean prices. A key measure for ethanol blending prices for refiners is the D6 RIN prices and these have increased more than 3-fold to an average of US$1.38 this year, compared to an average of US$0.43 in 2020. If the US government approves any support measures, then this could result in weaker domestic corn and soybean demand in the short term.