Biofuel Buzz Sparks a Breakout, but Is the Market Getting Ahead of Itself?

All three major markets were solidly higher today after a delayed response to President Trump’s Iowa speech that included potential expansion in year-round E-15 ethanol. Both corn and beans hit overhead technical resistance and increased farmer hedging before closing off the daily highs, but wheat posted the largest gains with a technical breakout. Other than the President’s speech, major bullish news was absent, but his supportive statements about the bio-fuel sector did attract buyers with the upcoming EPA announcement on 45Z and small refinery exemptions now potentially more bullish than expected. Thursday’s weekly export report is expected to again be strong for corn and wheat as prices were very competitive with world offers for the last 2-weeks , which produced last week’s enormous weekly corn sales.

News and Notes:

• The first 2-weeks of February are trending wetter for Argentina with no threatening heat or dryness in Brazil’s forecasts. Brazil’s bean harvest is moving quickly with great early yields reported. The brutal cold through the Midwest, Delta and East Coast has contributed to river freezing and slow barge traffic, which has improved river basis.
• The daily July wheat chart is on Page 2 and today’s breakout over through and close over both the 50 (green line) and 100 (pink) DMAs adds some needed strength in the grain sector. The brutal cold and recent winter kill on the US wheat crop and the US Dollar falling to 4-year lows this week have helped rally prices to new 2-month highs. We were aggressive in early wheat sales, so I am not recommending new sales, just catch-up sales if you are undersold. The next upside technical target is the 100-DMA (black) at $5.75.
• The 2026 bean Sales Target was hit in early trade at $10.90 (November) to sell another 10%. This takes sales to 45% complete for new crop beans. Bean prices have rallied 40-45 cents in 2026 and are $1 over the April ‘25 trade war low in the face of the world bean market preparing for an 8 BBU SA bean crop harvest in the coming months. REWARD THE RALLY!!!
• Please take a few minutes to listen to the latest Helena FieldLink podcast with information on developing a smarter fertilizer strategy this year and an overview of the January USDA report.

• Although another government shutdown is probable on Saturday at midnight, the bill that re-opened the government in late 2025 had provisions that fully funded both the USDA and EPA for all of 2026. So, the 45Z SRE report and all USDA weekly and monthly reports will not be effected if the government shuts down again.
• With all the dysfunction and gridlock in Washington, the year-round E-15 bill would be a standalone bill and not be tied to hundreds of other additional non-biofuel addendums that have previously stalled passage. If President Trump was truthful that both Congressional majority leaders were working on the bill, Trump said he would sign it as soon as it hits his desk. Remember this is a mid-term election year and promises and passage are miles apart.

The potential of year-round E-15 sales is an enticing and potentially problematic solution to the domestic demand driver problem we have wanted for years. The potential would be slow to develop as more crush and blend facilities would have to be built and operational because the current ethanol infra-structure operates annually at roughly 90% which does not leave much room for immediate extra corn use. On the other hand, the outlook for late 2027 and beyond would be very bright as some estimates have an expansion of 2-2.5 BBU of extra corn used to meet the mandate. That would push corn used for ethanol over 7.25 BBU up from this year’s 5.4 BBU USDA estimate. The biggest problem is that corn must be sold before this could happen, and holding corn because of storage costs and interest expense is getting more expensive by the year. My strategy will continue to be to reward rallies, but also looking at affordable re-ownership as the lost revenue of the last 3-years does not need to be repeated because of early sales before a potentially bullish market shift.