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It’s a big week for the grain markets and it’s a big week on Capitol Hill, with a House vote on standalone legislation to allow year-round sales of the E15 ethanol blend slated for Wednesday.
The fundamental implications of the vote are more long term. The Senate would also need to pass the legislation to send it to the desk of President Donald Trump, who has vowed to sign it. But in a year when farmers, still reeling from the trade war, are facing down surging fuel and fertilizer costs as a result of the Iran war, the E15 battle has taken on growing political significance. That said, the outcome isn’t a sure thing.
Politico’s Grace Yarrow and Rachel Shin write:
- Vulnerable Midwestern Republicans, farm industry groups and even President Donald Trump have endorsed and pushed for the plan as a boon for corn growers and consumers ahead of the midterm elections. But fierce opposition from oil state lawmakers who argue it will hurt refiners could lead to another fight that might tank the plan.
And don’t dismiss the market implications of the vote in an environment where traders are closely attuned to developments in the energy market. David Whitcomb, head of research at Peak Trading Research, noted in a LinkedIn post that over the past 10 days, corn’s correlation to crude oil has climbed to +0.81 (a correlation of +1.0 would mean the two markets are moving in perfect lockstep). The corn-crude correlation is the strongest agri-macro relationship across the commodity complex right now, Whitcomb wrote.
E15 proponents are hopeful, but can be forgiven for feeling like Charlie Brown trying to kick the football after language allowing year-round sales was pulled from must-pass appropriations legislation in January and kept out of the farm bill last month. Farm groups were furious after the language was stripped from the appropriations package and farm-state Republicans were angry after it was removed for consideration alongside the farm bill due to opposition from oil-state Republicans.
Lawmakers this week are set to vote on a procedural motion to formally decouple E15 from the farm bill, Yarrow and Shin note, clearing the way for a vote on final passage of the E15 plan. They note the vote could put Speaker Mike Johnson, a Louisiana Republican, in an awkward position, forcing him to alienate part of his caucus and risking his standing in the House, particularly after Trump put the onus on delivering E15 legislation on the shoulders of Republican leaders.
Report says Trump set to lower beef tariffs: The Trump administration was planning to temporarily reduce tariffs on beef imports as soon as Monday, the Wall Street Journal and other media outlets reported. The move would suspend the annual tariff-rate quota, which applies a higher tariff rate after a certain level of beef imports are reached, on all beef-exporting nations, enabling more of the product to enter the U.S. at lower tariff rates, the WSJ report said.
At the same time, the administration plans to direct the Small Business Administration to increase loans and access to capital for U.S. ranchers, and to reduce protections for gray and Mexican wolves under the Endangered Species Act, a focus of rancher complaints, the report said. The administration will reduce some regulations for U.S. cattlemen, including Agriculture Department rules requiring them to use electronic ear tags on livestock.
Crop progress highlights: Corn and soybean planting continued at a solid pace last week, with USDA Monday afternoon reporting 57% of corn in the ground across 18 key states as of May 10. That matched the average estimate from a Bloomberg survey of analysts and was up from 38% a week ago and was ahead of the five-year average for this time of year at 52%.
- Soybean planting was 49% complete, also in line with the average estimate and up from 33% a year ago and 36% on the five-year average.
- Spring wheat planting was 53% finished as of Sunday, just slightly ahead of the average estimate of 51% and reflecting a pickup from 32% a week ago. The five-year average stands at 51%.
- Cotton planting was 29% complete, up from 21% a week ago and in line with the five-year average of 28%.
Wheat deteriorates: Last week’s rains in the western Plains didn’t help overall conditions when it comes to the long-suffering winter wheat crop. USDA said the percentage of the crop rated “good” or “excellent” fell to 28% from 31% a week ago, defying forecasts for improvement to 32%.
- Of the 790 crop progress reports that have contained winter wheat condition ratings since 1986, only 20 weeks have seen a “good” to “excellent” rating less than the current standing. The lowest value seen in the data series was 20% during the week ending May 7, 1989.
On the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop declined 10.90 points to 253.00. The SRW crop notched a very minor increase of 1.07 points to 364.66. Weather in SRW country has helped the crop from deteriorating much further given the milder temperatures and relatively more widespread rains compared to those in the Plains.
Get ready for WASDE: USDA will release its May World Agricultural Supply and Demand Estimates, or WASDE, report. It’s one of the most closely watched reports of the year because it offers the department’s first stab at new-crop balance sheets.
Analysts surveyed by Reuters expect USDA to slightly raise its old-crop (2025-26) corn ending stocks figure to 2.131 billion bushels from 2.127 billion bushels in April. Wheat is seen at 934 million bushels, down slightly from 938 million bushels last month, while soybeans are seen at 345 million bushels, down 5 million bushels from the previous estimate.
As for those new-crop estimates, corn is seen at 1.933 billion bushels, reflecting a drop in acres and yields in line with USDA’s projections from earlier this year. Wheat is seen at 833 million bushels and soybeans at 364 million bushels.
Timely safrinha rains: Brazil’s southern safrinha corn crop received a second round of significant rain this past week, following rains earlier this month, which will provide another notable improvement in subsoil moisture, according to World Weather Inc. Corn is in various stages of development with some reproducing and filling making this a critical time for rain to fall in support of good yields, the forecaster noted, with one more round of rain coming this weekend into next week to perpetuate the good production outlook.
In the meantime, eastern, central and northern Mato Grosso and Goias along with northeastern Mato Grosso do Sul have been drying out and are missing most of the significant rain events – so far, World Weather said. While there is some potential for rain in drier areas this weekend into next week, confidence in the significance of that rain remains low.
Caspian grain deliveries: A New York Times report on Saturday focused on the rising importance of the Caspian Sea as Russia uses the landlocked body of water to ship military and commercial goods to Iran.also indicate a swift increase
Russian trade officials and port statistics pointed to a significant jump in traffic in the past two months, the report said. Two million tons of Russian wheat that used to be shipped to Iran annually through the Black Sea – now under threat of Ukrainian attacks – is going via the Caspian, said Vitaly Chernov, the head of analytics for the PortNews Media Group, which tracks Russia’s maritime industry. “Against the backdrop of instability in the Middle East, Caspian routes to Iran look much more attractive,” he told the newspaper.
Don’t miss these must-reads:
- High stakes: Trump-Xi summit, WASDE and E15 set up crucial week for ag commodity markets
- Colorado’s biggest snow in 1,100 days raises a bigger question: Is the Plains pattern finally changing?
And check out this week’s Pro Farmer Podcast for a preview of Tuesday’s WASDE report and this week’s slew of other potentially market-moving events.