Today's featured video perspective: Russia, China, and Biofuel Shocks Ahead?
June 10 - Stocks continued to add to their gains today amid reports that the trade talks with China in London are going well. That has Wall Street cautiously optimistic that we'll get another announced "breakthrough" in the hours ahead. China and the United States are probably further apart today than they were two months ago, but they do seem to find something to agree on each time that they have high-level talks. The VIX is trading below 17 at midday, while the dollar index is trading near 99.1. Yields on 10-year Treasuries are trading near 4.47%, while yields on 2-year Treasuries are trading near 4.01%. Crude oil prices rallied above $66 per barrel this morning, before profit taking pulled them off their highs, while the grain and oilseed markets are mixed.
Winter wheat prices posted double-digit losses at times this morning, following another notable increase in crop ratings Monday afternoon. Not even a headline of Russian wheat area Rostov declaring a drought emergency was able to rally the market. Corn and soybean prices were also under pressure this morning, but value buyers emerged to buy corn after the July price fell to its lowest level since October amid rumors that we could get news on the biofuel front soon. That also supported the soybean complex as well. All of the above crops continue to look for a story, but none is to be found yet at a time when supply appears to be growing.
The winter wheat condition rating rose from the previous week's level yesterday afternoon, just as corn and soybean ratings rose. This week's condition index score for winter wheat rose to 341, up 5 points on the week, and up 9 points over the past two weeks, while now sitting 16 points above the 10-year average for the week. The graphic below shows that this week's condition index score is the 3rd highest of the past 10 years for this week of the growing season, suggesting that good yields are likely as the harvest moves north this month. This week's improvement was particularly noticeable in Nebraska, where drought areas have finally seen good rains. Nebraska's winter wheat crop was rated 48% Poor to Very Poor last week, after being 53% Poor to Very Poor the week prior to that. But that dropped to just 13% Poor to Very Poor this week, while the Good to Excellent rating jumped 20 points to 43%. The overall improvement in the winter wheat crop the past couple of weeks does little to support wheat prices, especially with spring wheat condition ratings rising as well.
That provides a drag for the corn market, although the nearby contracts were supported by some spread trades today. But July corn prices dropped to their lowest level since October this week as weather across the Midwest turns quite favorable overall. Yes, southern and eastern parts of the Midwest are still too wet, where there will likely be some unplanted corn, while some spots elsewhere continue to lean dry. But the crops overall continue to look good, with the next two week outlook being favorable as well. The long-range models continue to lean hot and dry for central and western areas, as they have for the past couple of months. However, that bias continues to fail to move forward into the nearby weather pattern, and some forecasters are starting to wonder if that will happen at all. The most supportive fundamental currently continues to be the expectation that we will get the biofuel blending mandates announced any day now, which the industry expects to be supportive for domestic demand. That will finally end months of speculation, although we'll still need to know the small refinery exemptions, and the funding mechanism details in the 45Z guidelines as contained in the "Big Beautiful Bill" currently in the Senate.
