Morning Commentary 6/14/21

CBT Falls To Sharp Overnight Loss as Traders Embrace Cooler/Wetter 9-15 Day Forecast; Which Model Will be Right?; G7 Pushes Climate Change

6:30 AM CT CBT Prices: July soybeans are down 26.00 cents at $14.82, July corn is down 17.0 cents at $6.675 and July Chi wheat is down 18.75 cents at $6.62.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT futures fell to sharp losses overnight as fund mangers traded the cooler/slightly wetter 9-14 day forecast vs this week’s ongoing warm to hot/dry pattern. Amid the low confidence interaction of a potential tropical system in the US Gulf and the cooler Central US weather forecast, we incorrectly expected that traders would add weather premium for the fall in US crop condition ratings (NASS report this afternoon) and this week’s continued hot/arid trend. Acute stress will be placed on Iowa, Minnesota, South Dakota, Wisconsin and Michigan crops this week amid temps in the 90’s and limited rainfall.

Confidence in the extended range forecast is low and more time is needed to assess rainfall amounts/locations. Temperatures will cool to more seasonal levels following the weekend, but ARC’s weather research is doubtful that this is a pattern change. Our bet is that next week will be a pattern interlude produced by a potential Gulf tropical storm. The vast dry soils across the Western US and this being only mid-June will return the heat/dryness to the Plains, and at least the W Midwest in coming weeks. There is no indication that a cool/wet Central US weather pattern is ready to be established.

In this uber volatile market, where traders are unable to measure crop yield in the early growth phase of ’21 US crops, the extended range forecast has taken on added market importance. AgResource is more confident in the 7-day forecast which offers limited rainfall with a new round of heat for the Western Midwest. US corn/soybean crops will continue to struggle with deepening dryness – and hope for a rain on the weekend and early next week.

AgResource looks for a broad decline in US corn/soybean crop conditions today with GD/EX ratings falling 2-4%. Producers in Iowa/Minnesota/South Dakota report corn rolling amid dry soils and extreme heat. Soil moisture is so short that regular weekly rainfall and a return to seasonal temps is needed immediately. The top end of 2021 US corn/soybean yields has already been lost.

The G-7 weekend meeting reconfirmed the US’s pledge to fighting greenhouse gases, taxing corporations, and offering and expanding vaccinations to the developing world. On the topic of China, the G7 did not agree and ended with a watered-down statement on how China regarding human rights. China offered no comment on the G7 statement overnight.

In international ag trade, August Malaysian palm oil futures fell 285 ringgits/MT to 3,378 ringgits on a continued speculative rout. Paris wheat futures are down €3.00/MT at €208.25. Dalian corn/soy futures were closed for a national holiday.

The 3 major forecasting models agree that hot/dry weather will persist across the W & C US this week with a few showers noted for the W Midwest this weekend. The forecasts do not agree on extended range solution which will add to this week’s CBT market volatility. US crops are far from being made!

North American Weather Pattern Discussion: The major weather models offer  limited rain for the N Plains and the W & C Midwest over the next 5-7 days, with a chance of improved rain/cooler temperatures starting on the weekend - and continuing next week across the Midwest.

The forecast models differ in rainfall amounts and their locations with the Canadian model offering an arid 10-day forecast, while the GFS/European models have some rain in days 7-10. None of the forecasts offer rainfall for everyone.  The coming rain is an interaction between a tropical storm in the Gulf of Mexico which draws cooler air southward along with a fetch of upper air humidity. The best chance for rain is in the weekend and next week. ARC doubts that the coming rain and more seasonal temperatures will be lasting. The acutely dry soils across the Western US are likely to spur additional high pressure Ridge development here which maintains an arid/hot trend for the US Plains and the W & N Midwest.

The 10-day precip map (below) is from the EU weather model. The EU model is the wettest for Iowa/Illinois, while the Canadian model is the driest, while the GFS is in between. The rains in the GFS/ EU models will be adjusted for location and amounts. Warm to hot temperatures prevail this week with highs in the 90’s.

Wettest 10 Day Forecast Model; EU Offers Needed Rainfall for Iowa/Illinois: 

GFS Model Places the Rains Across WI and S Missouri; Iowa/Illinois Drier

Canadian Model offers Scant Rains for the Central US next 10 Days; Highly Crop Concerning Forecast: 

10 Day Percent of Normal Rainfall From the EU Model; Building Dryness in the West

Above to Much Above Normal Temps This Week - Near to Below Normal Next Week:

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