First Thing Today: EPA Mulling Shift on How It Counts Biofuel Exports

Good morning!

Some pressure overnight... Corn futures are around a penny lower after a quiet overnight session, while soybean futures are trading low-range and down roughly 6 cents. Winter wheat futures are fractionally to 2 cents lower across all three flavors. The U.S. dollar index is slightly lower this morning, while crude oil futures are posting solid gains.

Weekly Export Sales Report expectations...

EPA mulling major shift for biofuel export policy... The Environmental Protection Agency (EPA) is reportedly considering a change to how it treats exported biofuel, allowing it to qualify toward biofuel quotas. Currently, each gallon of biofuel produced in the U.S. generates a tradable renewable identification number (RIN) that can be used to prove compliance with annual Renewable Fuel Standard (RFS) quotas. But the RIN must be withdrawn if that gallon is exported. On the other hand, since imported ethanol is blended into the fuel supply, credits associated with the use of foreign supplies qualify for compliance. Ethanol makes up the vast majority of exported biofuel, with the U.S. shipping roughly 1.2 billion gallons of mostly corn-based ethanol last year. It is also considering lower the 2018 biomass-based diesel, advanced biofuel, and total renewable fuel volumes, and/or the 2019 biomass-based diesel volume under the RFS to ease pressure on refiners.

Tax cuts/reform now enters the hard stage of filling in the details and congressional passage... Portions of a tax reform effort were unveiled Wednesday by President Donald Trump and GOP congressional leaders, including lower taxes on corporate profits, incentives for business investment, fewer and lower individual income tax brackets and the end of estate taxes, with the goal of boosting economic growth and benefiting middle-income families. Get details on the reform plan. The 10-year Treasury yield rose to 2.348%, the highest in two months, as Trump promoted what he called "the largest tax cut" in U.S. history. U.S. equities surged on hopes the cuts will become law this year. But that could be a daunting task.

NAFTA 2.0 update... Negotiators finished a chapter on expanding small- and medium-sized business access to markets and made advances on digital commerce, U.S. Trade Representative Robert Lighthizer and his Canadian and Mexican foreign counterparts said as the third round of talks completed in Ottawa. U.S. officials did offer text on seasonal safeguards for agriculture, which could block Mexican produce imports during certain times of the year. Lighthizer said contentious issues remain for the fourth round Oct. 11-15, when the NAFTA negotiators meet in Washington. Get more details.

Russian ag minister has high hopes for grain and wheat shipments... Russia will likely export 45 MMT of grain, including 30 MMT of wheat in 2017-18, forecasts Russian Ag Minister Alexander Tkachev. He added that this year's grain crop was on track to hit a record-high, detailing that the previous record was the 127 MMT crop of 1978.

DHS now says Jones Act Waiver for Puerto Rico still possible but is unlikely... Despite a statement from a Department of Homeland Security (DHS) that the agency denied a request for a waiver of the Jones Act to help speed aid to Puerto Rico, the agency now says it has not yet decided on the Monday request from lawmakers. However, senior DHS officials signaled Wednesday that a waiver is unlikely and a final determination could take days or weeks. Homeland Security officials are evaluating a Democratic request to waive a requirement that only U.S. ships carry emergency supplies to Puerto Rico in the wake of Hurricane Maria.

Brazil hopeful U.S. will lift ban on fresh beef next month... The U.S. could lift its ban on Brazilian beef next month, the country's ag ministry recently said. This could come after the U.S. wraps up its current evaluation of documents sent in response to questions that arose on a U.S. veterinary mission to the country. The ag ministry also points out that The U.S. recently informed Brazil it would allow thermo-processed meat exports from five plants to begin again, giving hope that the ban on fresh beef that has been in place since June due to food safety concerns would soon be lifted. The U.S. has said it would follow no timeline for lifting the ban.

Waiting for cash trade to begin... Traders are still waiting for cash cattle trade to get underway, with most hoping recent beef strength (though values slipped Wednesday), steady showlists and strong packer margins will help the market build on last week's $108 (mostly) to $109 cash action. October futures are in line with last week's action. Yesterday's online Fed Cattle Exchange auction provided little direction, as none of the 1,342 head of cattle offered sold.

H&P Report a big focal point today... Traders were encouraged by some signals demand is finally catching up to supply yesterday. Namely, average hog weights in the Iowa/southern Minnesota market declined slightly from the week prior -- a welcome change from recent reports that showed supplies were backing up. But the Quarterly Hogs & Pigs Report that will be released this afternoon is expected to remind of ongoing expansion in the industry, with all hogs and pigs expected to come around 73.647 million head, up 2.5% from year-ago. Hogs kept for breeding and kept for marketing are also expected to rise 1.2% and 2.5% from last year, respectively.

Overnight demand news... Jordan made no purchase in its tender to buy 100,000 MT of wheat. Saudi Arabia issued an international tender to buy 540,000 MT of barley.

Today's reports:

• 7:30 a.m., Drought Monitor -- USDA/NWS
• 7:30 a.m., Weekly Export Sales-- FAS
• 2:00 p.m., Agricultural Prices-- NASS
• 2:00 p.m., Hogs and Pigs-- NASS