Markets Taken Behind the Woodshed

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🇧🇷 Brazil Ups Biofuel Mandates
Starting August 1, Brazil will increase ethanol in gasoline from 27% to 30% and biodiesel in diesel from 14% to 15%. This move could make Brazil self-sufficient in gasoline for the first time in 15 years. Ethanol mainly comes from sugarcane 🌱, but corn-based ethanol 🌽 is growing fast. About 70% of Brazil's biodiesel is made from soybeans.  

🌧️ Soaking Rains Ahead for Corn Belt
Heavy rainfall is expected across the Corn Belt over the next 7 days, with precipitation forecast at 152% of normal. The Upper Midwest—especially eastern South Dakota, Minnesota, and Wisconsin—will get the most rain. Nebraska, Iowa, Illinois, and Indiana will also see showers. Temperatures will be warmer in the Eastern Corn Belt and cooler west of I-29. Overall, temps will run about 0.8°F above normal.  

💵 Tariff Uncertainty Clouds Fed Outlook
Fed Chair Jerome Powell told lawmakers it's tough to predict how tariffs will impact inflation. Despite lower inflation and pressure from President Trump to cut rates, Powell urged caution, citing a strong economy and uncertain trade effects. Some Fed governors support a rate cut as early as July, but Powell warned inflation may rebound later this year. Meanwhile, Trump continues to criticize high interest rates for increasing government debt costs.  

🛢️ Ethanol Output Slips, But Remains Strong
US ethanol production dipped 2.5% last week to 1.1 million barrels/day but is still up 3.6% from a year ago. Ethanol stocks climbed to 24.4 million barrels—well above seasonal norms. That’s up 1.2% from last week and 4.2% from last year. Margins, however, softened slightly, according to Reuters. 📉  

📉 Dollar Drops as Tensions Ease
The US dollar weakened this week following a ceasefire between Iran and Israel. Falling oil prices also removed a key support for the dollar. With Middle East tensions calming, the greenback’s direction now depends more on domestic data and Fed policy. Markets are currently pricing in 60 basis points of rate cuts by year-end. The Dollar Index is down nearly 10% in 2025, hitting its lowest point since March 2022.