• HEADLINES: EPA expected later today with biofuel mandates; Midwest cash corn catches fire.

• Chicago futures are mixed at midday with the soybean/corn spread giving back some of Thursday’s gain as funds are nearly finished with their intra market spread unwind. Funds were large sellers of corn/buyers of soybeans in recent days as they exited long corn/soybean spreads to manage losses. Soybean’s fall tugged wheat values lower as traders awaited Wednesday’s Istanbul meeting on the operational details of a Ukraine food corridor. China is on holiday today.

• The Turks were fingered as a destination for Ukraine wheat that was pilfered by the Russians. The trust of Ukraine in Turkey to monitor/provide security for a marine grain export corridor is low. Therefore, the US/UK or France would have to provide naval warship assistance in the Black Sea which will likely not be allowed by Russia or Turkey.

• Russia knows its importance in raw material markets in beating back inflation and will pressure the world economically its own unwritten sanctions in the weaponization of fertilisers, grain, and energy. Note that WTI crude oil futures have risen to $119/barrel with gasoline and diesel prices scoring new record highs. Forward coverage pressures are growing, though end users and importers do not want to engage in new purchases if a Ukraine food corridor would be allowed. The talk of a corridor has caused world millers/importers and end users to hope for a deal that produces a larger price decline. Remember, hope is NOT a strategy!

• If the corridor is not allowed, or takes months to operationally engage, world end importers and end users will step forward as Egypt/Algeria did this week. World wheat importers in North Africa have relied on their own wheat harvest and old crop stocks in the months following the invasion. But the time is drawing near that such a waiting cannot continue. Seasonal lows in Paris/Chicago wheat futures are being scored with cash markets staying stubbornly high.

• Chicago brokers estimates that funds have sold 6,400 contracts of soybeans, 2,600 contracts of corn, and 3,900 contracts of wheat. In the products, funds have sold 2,100 contracts of soyoil and 900 contracts of soymeal. Cash basis levels for US corn shot up yesterday as exporters/ethanol producers fight for supply. July corn should again gain on new crop December amid the historically high US cash corn basis bids.

• The Labor Department offered that the US economy added 390,000 jobs in May with the US Employment rate holding steady at 3.6%. This was stronger than expected which rallied US interest rate to their best levels in 2 week and caused a sharp decline in the DOW of 340 points. Key US inflation data will be released on June 10. We look for the US inflation rate to stay elevated at 7.7-8.1% in May and for the pressure on the US Central Bank to hike interest rates by 0.5% in the next 2 meetings. The only real inflation hedge for fund managers has been to be long of grain, energy, and metals. Bitcoin or precious metal values have not correlated very well to heated inflationary trends. Hedge funds favour being long of “stuff” and short of “stocks”.

• Rumours have the EPA issuing the 2022 biofuel blending mandate at 20.63 million gallons and deny all small refinery blending applications. The prior proposed 2022 Biofuel blending mandate was 20.77 million gallons offered in December. However, the 2022 Biofuel mandate is still well above the 2021 level of 18.52 billion gallons and the 2020 rate of 17.13 billion. The Biomass Based Diesel mandate is expected to rise to 2.76 billion gallons, up 330 million gallons from 2021.

• The midday GFS weather forecast is like the overnight run with limited rainfall for the N Plains and the SC Canadian Prairies. The best rain will drop across the Central Plains, Missouri, and Wisconsin. No extreme heat is noted with a tropical system further south across Florida. The forecast leans favourable to Central US crops, but the medium and long-range models continue to argue in favour of heat/dryness developing across the Plains/W Midwest in late June and July. Time will tell, but it is risky to be overly bearish until above trendline corn/soy yields are confirmed.

• US cash corn/soy markets are firm and underpinning July futures. It only takes a modest weather scare to produce new Chicago highs. And for now, US weather cannot get much better. The risks are to the upside, we stay bullish.

• P.S. French wheat crop condition fell for the fifth week in a row to 67% good/excellent, down 2% from last week, and compared with 80% last year. A few sporadic rain showers are expected this weekend, but drought busting rains are not forecast.

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