Geo-political events dominate the night session.

As you are likely aware by now, Israel launched a preemptive strike on Iran’s nuclear facilities overnight, triggering a sharp rally in energy and metal markets and providing a modest lift to the grain trade. The world is now bracing for Iran’s retaliation. Several neighboring countries are calling for de-escalation, but some level of counteraction is expected. The most immediate impact was a spike in energy prices, with crude oil surging 10% on the news. Although markets have since cooled, crude is still approaching $75.00 per barrel, just weeks after hovering near $50.00. This strength in energy markets, if sustained, should ultimately support renewable fuels.

Yesterday’s WASDE report was largely in line with expectations and included few changes to supply and demand balances. The only adjustment to the US corn balance sheet was a 50 million bushel increase in exports. Wheat exports were raised by 25 million bushels. There were no changes to the soybean balance sheet, keeping that complex in a continued rationing position. Globally, this year’s corn carryout is projected to be the tightest in over a decade, and that is starting to attract more market attention. With the WASDE numbers now behind us, trade focus will shift to the upcoming June 30th reports and position-building. Weather will also take on greater importance as the market turns its attention from planting progress to crop development.

According to Reuters, the EPA is expected to announce biofuel blending requirements (RVOs) today, which will reportedly fall short of industry requests. The industry had pushed for 5.25 billion gallons for the 2026-2028 period. However, recent rumors suggest the mandate could be set at 4.65 billion gallons—still well above the current requirement of 3.35 billion gallons. This announcement marks the first indication of the EPA’s direction for future biofuel policy. Additionally, small refinery exemption decisions are expected to follow and may reduce the effective mandate. Presidential approval is still pending on the OMB’s completed scoring of the new RVOs. Meanwhile, the 45Z biofuel subsidy program was included in the House version of the reconciliation bill, which remains under negotiation in the Senate.

One weather forecast that could become a renewed threat to production, particularly for wheat, is the continuing dryness in Western Europe. Soil moisture levels are low, and the 10-day forecast remains mostly dry. This is near the critical threshold after which rainfall may no longer benefit EU wheat. Next week will be crucial, especially since many end users have been buying on a hand-to-mouth basis and have not yet been compelled to chase a rally. Prolonged dryness could prompt some to consider forward coverage.

Cattle futures were mostly lower yesterday for both live and feeder contracts, though late-session buying helped recover some losses. A weaker start is expected today due to concerns over the impact of higher energy prices on consumers and broader market pressure from a declining stock market, although equities are now off session lows.

As of Thursday’s close, cash trade in Texas was up $4-5 for the week, with live cattle trading at $234-235. Live trade in Texas ranged from $233-238, $2-6 higher than last week. The northern market has been leading cash prices in recent months, and steady prices are expected there as the north-south spread narrows. In the dressed trade, northern prices held steady at $380. Futures markets remain at a steep discount to cash, and large index fund holdings, particularly in feeder cattle, pose a risk if liquidation is triggered.