The latest US Crop Progress Report highlighted a further decline in crop conditions in the week ending 18th June. Dry weather across key growing states has negatively impacted the crop, with 54% of the crop now rated to be in good-to-excellent condition, a 5-percentage point (p.p) decline on the week. Also, 12% of the crop was rated to be in poor-to-very poor condition, a 3 p.p and 6 p.p increase on the week and year, respectively.
In addition to recent dryness in the US, the US Environmental Protection Agency’s (EPA) 2023-2025 biodiesel blending mandate (final ruling expected later today, 21st June) has recently contributed to the upward momentum in soybean and soybean oil prices. At the time of writing, Mintec has received market information suggesting that the EPA plans to finalise biofuel blending volumes at higher levels than initially proposed. These volumes are expected to be 20.94 billion gallons in 2023, 21.54 billion gallons in 2024, and 22.33 billion gallons in 2025, compared to the previously announced proposal of 20.82 billion in 2023, 21.87 billion in 2024, and 22.68 billion in 2025. If these numbers hold in the official release, market players consider this to be a very bearish outlook. The market has experienced a significant price increase based on the expectation that this release would greatly curtail the amount of soy oil available in the marketplace, leading to a greater reliance on soy and potentially other vegetable oils as substitutes. Furthermore, market makers and participants have taken substantial long positions, essentially betting on the continuation of the rally, which would be negated if these figures hold.
