The recent decision by the Environmental Protection Agency regarding small refinery exemptions impact ag markets significantly across the grain and energy sectors. Farm Director KC Sheperd recently sat down with Oklahoma State University crop marketing specialist Todd Hubbs to examine the market implications of the EPA’s actions, export demand bottlenecks, and grain marketing decisions facing producers as harvest gets underway.
EPA Small Refinery Exemptions and Biofuels
The EPA granted 29 small refinery exemptions for facilities producing under 75,000 barrels per day seeking economic hardship relief from Renewable Fuel Standard (RFS) requirements. However, the agency paired those waivers with a 100% reallocation guarantee. Rather than removing Renewable Identification Numbers (RINs) from the system—which would reduce blending obligations—the EPA is placing those obligations onto larger refiners.
The reallocations will be shifted forward into the 2026 and 2027 Renewable Volume Obligations (RVOs), following a modest allotment for 2024 and a larger share for 2025. This decision provides critical underlying support for vegetable oils and fats, including soybean oil and tallow, preventing the sharp price declines that typically follow unmitigated waiver grants. Following the announcement, soybean oil prices recovered into the low 70-cent range.
Wheat Market Headwinds and Black Sea Constraints
The wheat market experienced a notable rally that pushed Hard Red Winter (HRW) wheat near $8.60 before profit-taking and international news prompted a sell-off. Key factors shaping wheat trade include:
- Export Price Disparity: U.S. HRW wheat at the Gulf remains roughly $1.30 per bushel above Australian Standard White (ASW) and nearly $2.50 above Argentine wheat, making it difficult to compete for price-sensitive Asian import business.
- Black Sea Bottlenecks: Russian wheat exports for August and September are tracking an estimated 50% below year-ago levels, while Ukrainian flows face logistical hurdles moving grain via rail and road through Romania and Poland.
- Selling Opportunities: While cash prices pulled back more than 30 cents on the day of the interview, cash bids above $8.00 earlier in the week offered Oklahoma growers strong marketing opportunities for both old and new crop supplies.
Energy Pressures on Basis and Transportation
Diesel and crude prices have firmed amid geopolitical tensions in the Middle East. Global refining capacity constraints continue to keep diesel prices disproportionately elevated compared to crude oil. Because global freight and domestic transportation depend heavily on ultra-low-sulfur diesel and bunker fuel, elevated fuel costs threaten to widen elevator basis levels if grain movement through export ports slows down.
Corn and Milo Production Outlook
With corn futures crossing above the $5.00 threshold, marketing focus turns toward the upcoming September USDA Crop Production report. Hubbs noted that private estimates, such as the Pro Farmer crop tour at 173 bushels per acre, would provide significant upside for prices if realized. However, his current models align closer to the USDA’s August estimate of 179 to 180 bushels per acre. Domestic ethanol demand and corn export volumes remain strong, offering baseline support.
The sorghum market faces tighter conditions. Dry weather across major growing regions is expected to force the USDA to lower milo yield projections. While ethanol grind consumed more than 10 million bushels of milo monthly before softening in July, limited supply and absent export tenders from China have left a wide basis spread between corn and milo. For producers harvesting corn and sorghum at profitable levels, securing prices on a portion of the crop remains a prudent risk management approach.
