5/28/21

Morning Commentary 5/28/21

CBOT Mixed Overnight - Dryness for the N Plains/W Midwest offers Support

6:30 AM CT CBT Prices: July soybeans are up 7.00 cents at $15.44, July corn is up 2.00 cents at $6.665 and July Chi wheat is down 3.75 cents at $6.725.

AgResource is on holiday schedule and will release our Weekend Research Wire after the close. Thank you to those who served in the US military and gave their lives for our freedom.

AgResource Morning Grain/Soy Comment & Analysis: Good Morning! CBT futures are mixed heading into a long US holiday weekend. The volume of trade is up following Thursday’s robust rally. China demand rumors prevail in corn and soybeans on the early week break and traders will closely watch to see if USDA/FAS announces any fresh sales in their daily reporting system?

 The European and Canadian forecast models offer dry weather conditions for the N Plains and the Northern 1/3 of the Midwest over the next 10-12 days. The extended range forecast returns the chance of showers to these important US production areas. However, our confidence that far out is low. ARC expects that CBT values will add weather premium to price on the prospect of a deepening drought across the N Plains/Canadian Prairies that might spread south and east with time during the early summer. Market sensitivity to US and world weather along with China demand will be rising during June.

US equity futures are higher as US President Biden is set to unveil a budget that would take US spending to $6 trillion in the coming fiscal year. The spending pact will be record large and substantially add to the US debt pile that will exceed $30 trillion in late 2021. The prospect of additional US spending and a strengthening US economy has pushed US equity prices higher. 

The US dollar is firm on a weakening Japanese yen (fresh covid outbreak) while the Turkish Lira slumps to a record low on inflationary concern. The weakening Lira has to the potential to diminish Turkish wheat import demand.

In international ag markets, July Malaysian palm oil futures rallied 79 ringgits to close at 4,162 ringgits/MT. Paris September milling wheat is down €.75/MT at €211.25/MT. China’s Dalian July corn settled rose 3.0 cents to $10.795/Bu while July soymeal rose $6.30/MT to $536.60/MT. Interior Chinese corn prices are holding near all time highs.

It was cold across the N Plains and the far Northern Midwest with temps in the mid to lower 30’s. Some patchy frost occurred that could have stunted emerging corn and soybean seedlings. However, widespread losses are doubtful, but the cold will slow plant growth.

Better than expected yields has prompted the Buenos Aires Grain Exchange to raise their estimate of the Argentine soybean crop 43.5 MMTs from 43.0 MMTs last month. The harvest pace has been swift due to favorably dry weather.

Market values are all about US/world weather with concern building over the deepening drought over the Northern US Plains, Canadian Prairies and the Upper Midwest. Acute dryness is also noted for NE China and the spring wheat areas of Russia. ARC Research believes that seasonal lows were formed Wednesday.

North American Weather Pattern Discussion: The EU and GFS models are in only fair agreement on the forecast, and our confidence in the solution has been diminished. Below normal rainfall is forecast for the Northern Plains and the Northern 1/3 of the Midwest for the next 10 days. The EU and Canadian models offer limited rain for this key area of the Central US.

Near daily storms produce near to above normal rain from the Central/Southern Plains through the SW and C Midwest. The Western US holds in a dangerous drought pattern that looks for fuel considerable heat this summer. The big question is whether the Western US drought pushes east?

The Northern Plains drought will deepen amid the dry forecast. The dryness looks to extend the Northern ½ of the Midwest. This area is drying out fast.

The attached 10-day precip forecast is from the EU model. A Ridge of high pressure will build across the Western US which will shove the jet stream northward.

10-day rainfall totals are estimated in a range of 1-3.00” across Nebraska/Kansas and N Texas. The best Plains rain chances are on the weekend. Central US high temps range from the 70’s to mid 80’s. The extended range offers an eastern US Ridge that spurs heat across the Ohio Valley.

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