CBT Lower on Weekend Rain for Iowa/Illinois/Wisconsin;US Central Bank Head Powell Testifies to Congress on Tuesday;NASS Condition Ratings
6:30 AM CT CBT Prices: July soybeans are down 13.50 cents at $13.825, July corn is down 11.0 cents at $6.4425 and July Chi wheat is down 5.25 cents at $6.575.
AgResource Morning Grain/Soy Comment & Analysis: Good Morning! CBT futures started the new week lower following better than expected rainfall across the Central Plains and the Upper Midwest. Several rounds of rain occurred across the Central US on the weekend with severe weather producing considerable storm damage of downed corn and hail stripped crops. Some estimates have damaged crops in the millions of acres. It will take days to better quantify the damage and if blown over corn is able to partially stand back up? Traders are trying to best balance the benefit of Midwest rain with storm damaged crops.
Friday’s CBT open interest declined 5,282 contracts in corn, 15,302 contracts in soybeans, and 2,551 contracts in wheat. It appears that both the bulls and the bears are reducing their market exposure ahead of the end of the quarter and the coming summer growing season.
US Central Bank Chief Powell will be heading to Capital Hill on Tuesday for Congressional testimony on how the US Central Bank will handle their pledge to expand labor and US employment rates and fight inflation at the same time. There were hints in last week’s Central Bank meeting of the FED raising rates.
US inflation appears to be gaining which may pull forward when the Fed slows its bond buying program and starts to hike rates. The US dollar has rallied on the potential of rising US interest rates in the past week. Commodity demand is strong and likely to increase which offers that inflation could be more structural compared to snarled transportation or production lines.
A seasonally cool week is ahead for the Central US which amid the recent rains will aid Midwest/Central Plains crops. ARC looks for a 2-4% decline in GD/EX ratings on corn/soybeans today, but stability is foreseen for next Monday as pineappled corn leaves (due to drought) look to recover. Last week’s intense heat/dryness took a real toll on Central US crops – including spring wheat. The question for traders is do they price in this week’s improved weather or the return of early July heat/dryness for the Plains/N Midwest?
In non-US world agricultural futures trade, August Malaysian palmoil futures closed 35 ringgits lower at 3,468 RM/MT. September Paris wheat futures are down €2.00/MT at €206.25. And China’s September Dalian corn futures lost $.12/Bu to $10.30 while September soymeal gained $2.50/MT to $530/MT.
Traders are awaiting confirmation from FAS/USDA that China booked 400-500,000 MTs of US new crop soybeans last Friday. And the CFTC will release their Commitment of Trader’s report this afternoon. US weekly corn exports are forecast at 60-70 Mil Bu with soybeans at 7-12 Mil Bu. July CBT options expire this Friday with cash corn, soyoil and soybeans trading well above futures.
The weak longs were pushed out of the market last week which should produce a back-and-forth market this week heading into the June Stocks/Seeding report.
AgResource holds to a bullish outlook on CBT weakness on strengthening demand and that it does not take much of US corn/soybean yield loss to produce new CBT highs. The market risks are to the upside with July/August the key months for yield determination.
North American Weather Pattern Discussion: The overnight forecast models are similar in their depiction of the US weather pattern; they just vary somewhat with the details of rainfall and temperatures this week. A seasonally cool weather pattern prevails this week as a Ridge of High pressure is set to return to the dry areas of the Intermountain west on the weekend.
The next chance for showers/storms is with a Midwest front late Thursday and Friday. This system looks to produce another round of .5-1.50” of rain from Iowa through the Eastern Midwest. The European model is slightly farther east with Iowa rains, but all the models hold the Plains and Minnesota in a dry pattern with warm to hot temperatures returning on the weekend and next week. The attached map is the EU model forecast of 10 days rainfall totals.
ARC’s concern is that dryness will persist across the Plains and the W Midwest in July. Record heat is projected across the Western US starting on the weekend and portions of that heat will be released eastward. A Ridge west/Trough east pattern would return hot/dry weather to the US Plains and the W Midwest during July. The recent and coming rains will aid the US corn/soybean crop, but our concern on the US July weather pattern is elevated.
10 Day Rainfall Forecast from the EU Model: Additional Central US Rains:
2 Week Temperature Anomaly - Record Heat Returns to the Western US
6-10 Day Temps Show High Pressure Ridge Extending into W Canada:
Below Normal Rainfall Trend Returns for N Plains and W Midwest on the Weekend: