Morning Commentary 5/11/21

CBT Bounces Overnight in Active Volume; N Plains, N Midwest and Canadian Prairie Forecast Drier Next 2 Weeks; Chinese Cash Corn Back at All Time High

AgResource Farm Marketing Advice for Tuesday: 1/ No new advice.

6:30 AM CT CBT Prices: July soybeans are up 7.25 cents at $15.9475, July corn is up 4.25 cents at $7.1575 while July Chi wheat is up 6.50 cents at $7.37.

AgResource Morning Grain/Soy Comment & Analysis: Good Morning! CBT values came under additional long liquidation pressure in early overnight trade but rebounded on concerning North American/Brazilian weather forecasts, and the likelihood that Wednesday’s May USDA report could hold a bullish surprise in terms of 2021/22 US corn and soybean balance sheet and end stock forecasts.

On Monday’s long liquidation market plunge, CBT corn open interest fell 8,707 contracts, soybeans 2,037 contracts and wheat 3,896 contracts. Traders with windfall profits were cutting risk ahead of the USDA report.

The NASS weekly crop report offered that 67% of the 2021 US corn crop, and 42% of the soybeans, and 70% of the US spring wheat crops were seeded. Yet cold temps delayed emergence with just 20% of the US corn, 10% of the soybean and 29% of the spring wheat crop pushing above the ground.

Importantly 80% of the North Dakota topsoil moisture was short to very short, while Minnesota was 44% and NW Iowa 61% short or very short on topsoil moisture. The Western US drought appears to be spreading eastward from the Dakotas. And weather forecasts have returned the potential for arid weather lasting across the N Plains and the NW Midwest for another 10-14 days.

The overnight US weather forecast has pushed southward the prospect of heavy rain from E Texas and the Gulf States where soils are already saturated, and flooding will be the result of 3-6.00” of rainfall. The forecast for the Northern US Plains and the Northern 1/3 of the Midwest is back drier. The Dakotas, Canadian Prairies, and the Northern 1/3 of the Midwest (including Northern half of Iowa) will hold in a below normal rainfall trend into May 25.  AgResource expects that the CBT will add back some of the weather premium that was extracted on Monday to account for the more threatening forecast.

Brazilian corn crop estimates continue to decline on the historic drought. AgRural knifed their Brazilian 2nd corn crop estimate to 65.1 MMTs from 73 MMTs with an all-Brazilian corn crop of 95.5 MMTs. ARC Research maintains that the final 2020/21 Brazilian corn crop will be below 90.0 MMTs amounting to 20 MMTs of lost corn production. Brazilian corn exports will fall a near like amount meaning that the US or Ukraine must export nearly 750 Mil Bu more into 2022.

The French Ag ministry lowered their corn seeding estimate by 10% to 3.56 Mil acres from 4.0 Mil acres last year on developing dryness.

June Malaysian palmoil futures fell 18 ringgits to 4,606 ringgits/MT as strong export demand underpinned values. Paris Sept wheat futures are up €2.00 at €225.50 in a rebound from Monday’s market lashing. China’s July Dalian corn futures fell 1 cent per bushel to $11.14/Bu while Dalian July soymeal rallied $2.80/MT to close at $555.60. Chinese cash corn prices are near historic highs

The May WASDE Report should hammer home that US corn/soybean end stocks will be one of the tightest in years with China active in booking US new crop corn. Demand rationing thru price is needed in old & new crop futures. Buy breaks.

North American Weather Pattern Discussion: The 3 primary weather models are in fair agreement on the 10-day forecast but offer differing views in the 6-10 day timeframe. The GFS model maintains a chilly outlook into late May while the EU and Canadian model solutions are both warmer.

None of the models offer much rain for the N Plains, the Canadian Prairies or the Northern 1/3 of the Midwest. This area will continue to struggle with short soil moisture with an estimated 67% of the US covered with some degree of drought. This is well above the landmass covered by drought in 2012, 1988 or 1983 in a comparable week. The 2021 dryness is noteworthy and concerning.

The attached precipitation forecast is from the EU model. Arid conditions persist across the Western and Northern Plains, Canadian Prairies, and the Northern Midwest into May 25th. Excessive rain looks to drop across SW Texas and into the Gulf States with totals of 3-6.00”. This wet to the south and dry to the north is not the dispersion of rainfall that is desired. The Gulf States will endure localized flooding amid such rain.

Next week is warmer with seasonal temps returning following this week’s cold conditions. Lows will be in 40’s/50s.

Rainfall Totals Curtailed for Northern Plains, N Midwest and Canadian Prairies: 

Cold Central US Temps This Week; Warmer Beyond The Weekend.

Brazilian Drought Becomes Historic as Corn Ends Pollination After May 20th: 

High Temps Hold in the 80's to the Lower 90's on Bone Dry Soils:

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