Morning Commentary 6/18/21

CBT Recover Strong Overnight as Traders Realize that Coming Rainfall Won't Be Enough Across the W Midwest/Plains;China Corn Import Data

6:30 AM CT CBT Prices: July soybeans are up 52.00 cents at $13.8175, July corn is up 12.0 cents at $6.45 and July Chi wheat is up 19 cents at $6.58.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT futures opened steady to only slightly weaker and spent the overnight trade rallying as selling pressure waned and end users stepped forward with new demand.

Thursday’s price lashing was overdone, and the selling faded amid uncertain Central US weather forecasts amid the potential for a concerning fall in US crop condition ratings on Monday. This week’s hot/dry weather has really battered W Midwest and N Plains crops according to producer sources with yield potential to fall off the table unless immediate soaking rainfall arrives. By soaking rainfall, we mean 2-4.00”, not the dust settling rains that 20% of Iowa has received in recent days. W Midwest corn/soy crops are under acute drought stress with recent day high temps reaching into the 90’s/lower 100s!

Several days of heat area forecast for the W Midwest before a few lite showers move through on Sunday. Iowa best chance of showers is late Sunday across the southern quarter of the state. The Ensemble Forecast models offer the needed soaking rain for the E Midwest States, with the west short changed.

CBT open interest fell sharply on Thursday’s meltdown with corn off 20,369 contracts, soybeans 12,050 contracts, and Chicago wheat down 10,810 contracts.

The US Gov’t is closed today for Juneteenth – a new Federal Holiday that was signed into law by President Biden on Thursday. This means that the CFTC data and any new US daily export sales announcements will be available on Monday. There are rumors that China was active in securing US new crop soybeans on Thursday’s sharp break. Confirmation of that demand will have to wait.

Cyclone 3 has a 90% chance of forming in the Gulf of Mexico according to NOAA with landfall to occur in SE Louisiana this weekend. The remnants of the storm will soak Louisiana, Alabama, and Georgia on Sunday/Monday.

The 3 primary weather models have differing degrees of wetness with the GFS offering 1-3.00” of rainfall for Iowa and the parched areas of the W Midwest. The Canadian and EU models are in the range of .5-2.00”. The Ensemble models seem to have the best handle on the pattern and are keeping any heavy rains across Indian/Ohio/S Illinois leaving a good portion of the W Midwest and the N Plains in drought with rains of 1-1.50”. If the long range models are correct in that a Western US Ridge returns, July could be a very hot/dry month for the W Midwest. Our concern for US Central weather stays high. The tropical system will produce an interlude with scattered Midwest showers.

China trade data showed that it imported 3.16 MMTs of corn in May, up 323% from the prior year. Wheat imports were 790,000 MTs and sorghum imports at 620,000 MTs. If China were to import 3 MMTs of corn each month into their southern livestock area, it equates to 36 MMTs annually - a workable number.

This is stepping out on limb following a day of market meltdown on Thursday, but ARC Research doubts that new crop corn/soy futures have scored their annual price highs. You do not need much of a yield decline for $7.00 Dec corn or $15.00 November soybeans.  And wheat is forming its own bull market on expanding world

North American Weather Pattern Discussion: The National Hurricane Center has raised the odds of cyclone 3 formation to 90% in the next 36 hours. Landfall near New Orleans is forecast on the weekend. The strength, location and intensity of the storm will have an impact on Central US rainfall. And for at least 7 days, the cyclone will cause a relaxation of the Ridge/Trough pattern that has prevailed during June.

The overnight models are similar in their rainfall forecasts from recent days. The GFS is the wettest with the Canadian the driest. But the models that have been doing the best job recently is the Ensemble Forecast Models. The GFS 10-day Ensemble rainfall solution attached. Both it and its European counterpart keep heavy rains over the E Midwest including Illinois. Michigan, Indiana, and Ohio will be favored with heavier 2-3.00” totals.

ARC’s concern is that dryness will persist across the Plains and the W Midwest following the coming 7-9 days of wetter weather. As the Ridge/Trough pattern returns, heat/dryness will be extremely unkind to crops west of the Mississippi River during July. The coming rainfall is welcomed, but the vast dry soils across the Western US are a worry for summer Ridging. Heat will be oppressive for the west.

GFS Ensemble Model 10 Day Rainfall Forecast: Heavy Rains Favor Eastern US:

June Percent of Normal Rainfall Including the Rains Forecast into late Month

June Average Departure on Temperature; Records for the West:

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