Friday's grain trade will start out mixed.

After a mixed overnight performance, the grain trade is slightly softer this morning. Soybeans are catching their breath after a sharp decline in futures yesterday, which followed limited losses in soy oil due to uncertain demand outlooks. US biodiesel blending remains unclear, with signs suggesting it may now total 4.65 billion gallons, falling short of the proposed and expected 5.2 billion gallons.

Today, expanded limits are in place in the soy complex $1.15/bu on soybeans, $30.00/mt on meal, and 4.5 cents per pound on soy oil. New crop demand is picking up on corn and soybeans, which is relieving for analysts. The question now is whether this is added demand or buyers simply covering needs on a market break.

Reuters reported testimony before the House Appropriations Committee on Thursday, where EPA Administrator Ed Zeldin stated that the agency will address the backlog of 160 small refinery hardship exemptions left from the previous administration. Zeldin added that the EPA is working on measures to prevent similar delays in the future. These exemptions would reduce the impact of the Renewable Volume Obligation mandate and put pressure on Renewable Identification Number values, making biofuel production less profitable.

Wheat futures are slightly lower this morning as US weather forecasts begin to show improved growing conditions, particularly rain expected in the Plains. Globally, the wheat story is more concerning. China has issued high heat and wind warnings for wheat-producing regions throughout next week. Crop scouts there warn that rising temperatures may cause wheat to mature early, potentially reducing yields. In France, good to excellent crop ratings declined again, and moisture will be critical over the next ten days.

The Kansas City wheat quality tour concluded Thursday with a projected final yield of 53 bushels per acre, 10 above the 5-year average. However, diseases such as mosaic rust and stripe rust appear to be spreading and could reduce yields by 10-80%. The National Agricultural Statistics Service used a harvest estimate of ninety-eight percent for Kansas wheat, but that figure may be too high. This could be the most optimistic wheat crop estimate for Kansas this season, and it is likely to be revised downward in future reports, as often happens with USDA projections.

We have been discussing the possibility of a counter-seasonal bottom and rally in wheat. Prices have declined during a period when they typically show strength. With disease now affecting not just HRW but also SRW wheat in the Delta and export sales gaining momentum, a counter-seasonal wheat rally could be developing.

Yesterday, live and feeder cattle futures continued to fall, following sharp losses from Wednesday’s topping reversals. Selling pressure may persist at the open this morning, although some bottom picking is likely to emerge later in the session. On Thursday, negotiated fed cattle sales rose across all regions, with live sales in the North two dollars higher for the week at $229, and live sales in the South one dollar higher at $220. These are record prices in every region.

If June cattle close below 211 for the week, there will likely be discussion about a confirmed cash market top. Next week’s performance of boxed beef will be critical, as the anticipated demand appears to be softening at current price levels. Slaughter numbers are expected to increase as we head into June.