6/11/21

Morning Commentary 6/11/21

CBT Retreats Overnight on Another Round of Dakota Rain; 10-14 Day Central US Weather Forecast Threatening; US Corn/Soy Conditions to Fall

6:30 AM CT CBT Prices: July soybeans are down 8.00 cents at $15.36, July corn is down 10.0 cents at $6.89 and July Chi wheat is down 5.00 cents at $6.7875.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT futures are broadly weaker on a cold front that passed across the Dakotas producing needed rainfall of .25-1.25”. A passing cold front has held together passing into Eastern North and South Dakota.

Like Tuesday, the market will have to decide if it is more important to pay homage to the overnight Dakota rains or the forecast of additional heat/ dryness across the Central US into June 22nd?

AgResource suspects that early CBT weakness will be followed by a rally into the weekend. Fridays tend to be trend days. And with US corn/soybean crop condition ratings to fall broadly on Monday, we doubt that few traders want to be short heading into an important weekend of weather. A high-pressure Ridge continues to dominate the US weather pattern which will produce ongoing hot/dry weather for the N Plains and the Western 2/3 of the Midwest.

This is the last day of the index fund roll which will offer support to July futures contracts. 1st notice day is on June 30th and traders remember the strong rally in late April/early May as the shorts did not want to hold their positions with cash markets trading at premiums.

AgResource looks for a broad decline in US corn/soybean crop conditions on Monday with GD/EX ratings falling 3-5%. Producers in Iowa/Minnesota/South Dakota report corn rolling amid dry soils and extreme heat. High temps reached into the 100’s across S Dakota, Minnesota, and Iowa late Thursday. Corn is unable to root down in some areas due to acutely dry soils.

The EU/Canadian/GFS forecast models offer below to much below normal rain for the Central US. Following a trend that extends backwards for months, the GFS model is the wettest while the EU the driest. The EU/Canadian models have limited rain for a large swath of the Midwest/Plains over the next 10 days. Illinois/Indiana are included in this arid weather trend. The GFS has some rain, but totals of .1-.8” fall well below normal. Iowa crops in particular need rainfall – and the 10-day forecast is dry.

And Midwest heat will be unrelenting under a semi static high-pressure Ridge that holds across the Intermountain West and sometimes extends east into the W Midwest/N Plains. The Central US is building an impressive string of 90-degree days that will pull weekly corn/soy/spring wheat crop ratings lower into July.

In international ag trade, August Malaysian palm oil futures fell 181 ringgits/MT to 3,663 ringgits. Paris wheat futures are down €2.25/MT at €210.25. September Dalian corn settled $.10/Bu higher at $10.82 while September DCE soymeal lost $3.40 higher at $563.90/MT.

The Chinese ag ministry reduced China’s 2020/21 corn consumption forecast by 3 MMTs due to the feeding of other grains including wheat/rice.

The Dakota rains help, but they will not end the dire drought. Broad swaths of the Midwest will endure heat/dryness for another 10-12 days.  The 2021 June weather pattern is drier/hotter than 2012 with the forecast offering limited respite. This is no place to be selling breaks. The upside price risks are substantial.

North American Weather Pattern Discussion: The major weather models offer  limited rain for the N Plains and the W and C Midwest over the next 10-12 days. The GFS is the wettest of the models, but here too, totals fall well below normal. The forecast models agree that a hot/dry weather pattern will continue across the Western and Central US into June 22nd. ARC notes that a tropical system is causing the models fits in the extended 12-15 day period, but there is no indication of a return of normal rainfall and near to below normal temperatures. ARC’s concern for Central US crops stays elevated.

 A cold front is producing showers/storms across the Dakotas which has produced rainfall of .25-1.25”. Like Tuesday, radar estimates are likely overstating the overnight rainfall.

 The 10-day precip map (below) is from the EU weather model. A broad area of dryness extends from California into Michigan and Kentucky and includes the key crop states of Iowa, Minnesota, Wisconsin, Michigan, Nebraska, Missouri, Kansas, and Illinois under a Ridge of high pressure.

Temperatures stay well above normal with highs in the N Plains and W Midwest ranging from the mid 80’s to the mid 90’s with the warmest readings for the W Midwest.

EU Model Has Limited Rain Potential for a Broad Area of the Western and Central US: 

The Wettest Model - The GFS which Still Has a Below Normal Rainfall Pattern:

Canadian Model Percent of Normal for the next 10 Days- Broadly Arid weather with falls in Soil Moisture.

Above Normal Heat for the Western and Central US Next 2 Weeks: 

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