Weather Model Debate-Which to Choose?;Central US Crop Stress To Sharply Rise on Coming Heat;China Dalian Futures Do Not Follow Chicago
6:30 AM CT CBT Prices: July soybeans are down 10.50 cents at $14.55, July corn is up 2.5 cents at $6.70 and July Chi wheat is up 1.25 cents at $6.6275.
AgResource Morning Grain/Soy Comment & Analysis: Good Morning! It is all about Central US weather and the overnight CBT proved that point as each primary model forecast produced a new reaction in the marketplace.
Initially, CBT values were stronger on the dry European forecast model that was released Tuesday afternoon (after CBT close). The overnight US GFS forecast model added rain for the parched state of Iowa which caused CBT values to decline – in the case of soybeans to sharp losses on speculative selling. The drier Canadian model added some support, but it was the delayed European weather model that finished its run around 5:30 AM CT that rallied CBT values on its continued dry solution for Iowa and Illinois. The European weather model’s release was delayed due a hardware failure.
The forecast models are struggling with a developing tropical depression in the Bay of Campeche, its future path and intensity when it makes landfall near New Orleans as tropical storm or weak hurricane this weekend. The models differ on the resulting downstream weather across the Central US based on this tropical system. Historically, the EU model has the best track record with tropical systems, but last week’s GFS Dakota rain win has traders cautious.
Picking the right model forecast is difficult enough, but the importance of rain for Iowa, Dakota, Minnesota, Missouri, Wisconsin, and Michigan crops can not be overstated. The rains are critical with crops under acute stress due to limited soil moisture and the coming few days of extreme heat. Some Iowa corn has halted its growth phase due to the acute soil dryness.
So far, May-June has been as drier or drier than 2012 across the N Plains and the W Midwest. CBT values will explode upwards if a good 1-2” of rain does not fall across Iowa/Minnesota/Wisconsin and Illinois in the next 10 days.
June % of Normal Rainfall: Linger Drought will add Importance to early July Rainfall:
The forecast for July looks to return a Ridge of high pressure to the Intermountain West amid their historic dry soils (drought) with this area being a breeding ground for high pressure Ridging. This Ridge would return the N Plains and the W Midwest back to a hot/dry upper air flow. AgResource’s concern for Central US weather stays high – unfortunately.
In international ag trade, August Malaysian palm oil futures fell 116 ringgits/MT to 3,464 ringgits following the inability of Chicago to rally. Paris September wheat futures are up €.50/MT at €206.25. China returned following 2 days of holiday with Dalian September corn futures down just 4 cents at $10.63 while September soymeal lost $3.90/MT to $543.70. Dalian did not follow the sharp decline in CBT values that occurred on Monday/Tuesday.
AgResource Research doubts that the grain bull market has ended. Weather markets often feature sharp rallies and falls on forecast changes. Amid tightening old crop US stocks, this is no place to make new sales. Its July and August weather that have the final say on 2021 US corn/soy yields. Midwest rains next week will key price action into the June 30th NASS reports.
North American Weather Pattern Discussion: The primary weather forecasting models continue to struggle with a tropical depression that is developing in the Bay of Campeche, its future direction, intensity, and the impact on downstream Central US weather. It is a big deal with W Midwest crops parched.
Adding to the overnight confusion is that the European model was delayed due to a hardware issue. It was released around 5:30 AM CT which rallied CBT values based on its drier profile for Iowa/Illinois for the next 10 days.
The 0Z US GFS forecast went wetter for Iowa/Illinois with rains of .8-2.50” while the Euro has rains of traces to .8”. The Canadian model is in between with rains of .25-1.50”. None of the models will solve Iowa’s deepening drought, but amid the coming 2-3 days of extreme heat/dryness, any rain is welcome.
The next 2-3 days will feature dryness with extreme Midwest heat. Des Moines Iowa is forecast to reach 99 degrees today. Rain chances start Saturday and persist into next week. ARC sees the GFS as too wet, but the Euro is too dry. A compromise is advised. Yet, there are clear indications that a Western US high pressure Ridge will return in late June/ July that creates additional heat/dryness. The coming rain chances and cooler temperatures are an interlude – not a pattern change.
Dry European Model Forecast for Iowa/Illinois into June 26th:
Wet GFS Model Forecast for Iowa/W Illinois into June 26th:
Canadian Model Sides with Drier EU Model for Iowa/Illinois:
Temperatures STAY Well Above Normal for Western Half of the US Next 2 Weeks: