Geopolitical Shocks and EPA Action Fail to Lift Grains
Bertrand Oesterle, StoneX Vice-President of Clearing and Execution Sales, discusses how geopolitical shocks and regulatory moves influenced but ultimately failed to sustain a rally in grains and oilseeds.
Key Takeaways
Israel–Iran conflict spurred energy and grains rally, but markets quickly corrected
EPA biodiesel mandate lifted soybean oil, but pressured feed and related crops
Despite multiple bullish catalysts, bearish sentiment and supply outlook dominate
Geopolitics Briefly Rattle Grains, Then Fade
Oesterle recounts the market’s reaction to Israel’s June 13th strikes on Iranian nuclear and missile sites, followed by Iran’s retaliation. Energy prices surged, with Brent climbing above $78 before falling back to $72. Grains and oilseeds saw similar volatility. He also underscores the strategic risk to fertilizer markets, as Iran is a top exporter of both urea and ammonia.
EPA Mandate Sparks a Soy Complex Rebound
The EPA’s updated biodiesel mandate raised volume targets from 3.35 to 4.45 billion gallons. Soybean oil went limit up on Friday 13 June, and again the following Monday, although soymeal dropped, which is viewed as bearish for feed grains like corn and wheat. This surge in soy oil extended to rapeseed, helping farmers secure better sales, as they may hold wheat longer thanks to this rapeseed-related treasury support.
Spec Positioning and Supply Overhang Weigh on Rally
Despite bullish developments, the rally fizzled. Only 5–7K lots in Paris wheat were covered out of 292.4K shorts. Oesterle notes the WASDE report offered no support either, keeping Chinese output steady while adding 700K tonnes to stocks. Meanwhile, China’s wheat harvest is nearly complete. On the supportive side, U.S. crush data for K25 hit a May record at 192.8 mb. Yet funds remain heavily short across grains, with few signs of a shift.
Oesterle emphasizes that bears still control grains markets. US crop conditions remain generally favourable, despite minor declines in winter wheat and soybean ratings. Brazil’s second corn harvest is progressing, if slower than last year. Risks exist, but are scattered. These include dryness in western Canada, floods in Argentina, and dry conditions in France and Manitoba. Yet none have yet coalesced into a catalyst capable of shifting the broader sentiment.
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---- Written by Frederic Guetin, StoneX TV Producer
---- Expert: Bertrand Oesterle, StoneX VP of Clearing and Execution Sales
Grains & Oilseeds
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