6/22/21

Morning Commentary 6/22/21

Battle of Crop Ratings vs the Wet Forecast for the SE & E Midwest; US Spring Wheat Ratings Collapse; Cash Markets Support July Futures

AgResource Farm Marketing Advice for Tuesday: 1/ No new advice.

6:30 AM CT CBT Prices: July soybeans are down 1.00 cent at $14.14, July corn is down 3.00 cents at $6.5625 and July Chi wheat is up 4.00 cents at $6.655.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT grain futures started Tuesday with a rally tied to the fall in US corn/soybean/ spring wheat crop conditions due to recent hot/dry Central US weather. The lower ratings sparked traders to discuss the potential for sub trend US corn/soy yields and tightening 2021/22 US end stocks.

However, the forecast of soaking rainfall for Illinois/Iowa backed values lower amid the prospect that ratings will stabilize or improve amid cooler temperatures and the rain. It is a battle of ratings vs the Central US weather forecast for Tuesday.

CBT open interest totals for Monday showed a fall of 17,518 in corn, 3,713 contracts in soybeans, and 6,527 contracts in wheat. July open interest is being liquidated prior to 1st notice day in just 6 trading sessions.

US stock market futures are steady as investors weighed the prospect of economic growth against inflation ahead of testimony from US Central Bank Chairman Powell. 10-year Treasury rates rose as did the US dollar. Crude oil awaited clues from OPEC amid a rapidly tightening world energy market. Powell is expected to indicate that US that while inflation is up noticeably, it should move back to the Fed’s 2% target as supply chain issues are resolved.

NASS indicated a 3% fall in US corn GD/EX ratings to 65%, a 2% drop in soybeans to 60% GD/EX, while spring wheat ratings imploded 10% to just 27%.  With 27% of the US spring wheat crop heading, the time and chance for yield improvement are quickly fading. A sizable 55-75 Mil Bu plus decline in US spring wheat production lies in the offing which is likely to maintain the rally in Minneapolis wheat futures. The nearby July Minney contract has rallied more than 30 cents overnight with contract highs $8.43 in sight.

And just 32% of the US pasture ground is rated GD/EX which is rallying forage prices and causing concern for liquidation of the Plains cow herd. Rains are desperately needed across the Plains and the NW Midwest. The good news is that forecasts offer soaking rains for Illinois, Indiana, Missouri, and Iowa over the next 10 days. Any extreme heat is forecast to stay across the Western 1/3 of the US with only brief intrusions into the Northern US Plains.

In non-US world agricultural futures trade, August Malaysian palmoil futures closed 2 ringgits lower at 3,466 RM/MT. September Paris wheat futures are up €1.25/MT at €208.50. And China’s September Dalian corn futures lost $.01/Bu to $10.29 while September soymeal gained $.40/MT to $530.40/MT.

A back-and-forth market is expected heading into the June Stocks/Seeding report on June 30th. As US spring wheat ratings showed in late May, rain stabilizes conditions, but is unlikely to return crop ratings to prior levels.

Key this week will if rains are able to reach into the Dakotas, Minnesota, Nebraska, and NW Iowa? Old crop July contracts should be the upside leaders into 1st notice day on premium cash markets. ARC holds to a bullish CBT view with our climate research suggesting a return of hot/dry weather in July.

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. The EU model is the wettest with 2-5.00” of rainfall across Iowa/Illinois, while the GFS offers 1-2.50”. The models struggle in forecasting the amount of rainfall from T storms. Yet, the GFS has had the hot had lately and its 10-day rainfall forecast is below.

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 storms linger thru the weekend with total rainfall adding up to 1-3.00” across Illinois, Missouri and portions of Iowa.

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.

Additional Rainfall for the Eastern and Central US into July 2nd: 

Extreme Heat for Western and NW US into July:

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