Morning Commentary 6/23/21

CBT to Stabilize on Falling North American Wheat Production; N Plains & Minnesota Crop Production Important; China Soybean Buying Noted

6:30 AM CT CBT Prices: July soybeans are up 7.00 cents at $14.015, July corn is up 1.25 cents at $6.61 and July Chi wheat is up 9.00 cents at $6.60.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT grain futures were initially lower overnight on several T storm clusters that dotted C and E Iowa (and pushed into Northern Illinois overnight) as the prospect of improved Central US rainfall pressured summer row crop valuations. CBT values are totally focused on US weather and the prospect of Iowa rainfall. However, that selling was quickly absorbed by China securing 6-10 cargoes of US new crop soybeans and the growing worry over ’21 US wheat supplies.

 The worst drought in a decade shows no sign of ending across the Northern Plains and the Canadian Prairies. AgResource (and a host of other analysts) cut their North American spring wheat crop estimates by 60-80 Mil Bu which along with US elevated HRW wheat feed demand is starting to importantly tighten US 2021/22 wheat end stocks. North American protein wheat is in high demand and the North American wheat markets are shifting into a more bullish phase with spring futures the upside leader.

AgResource notes that combined soybean acres of the Dakotas and Minnesota at 20.5 mil acres is equal to that of Iowa/Illinois. And in corn the Dakotas and Minnesota planted 17.0 Mil acres (NASS Mar 31st Report) or 19% of the US total.

A 10% yield loss in corn/soybean crops in the Dakotas/Minnesota would produce a US production loss of close to 300 Mil Bu of corn and just over 100 Mil Bu loss of soybeans – a sizeable amount.

US corn 2021/22 corn end stocks are estimated at under 1,000 Mil Bu (smaller corn stocks due to larger old crop export/ethanol grind demand) with new crop soybeans at just 140-150 Mil Bu. A 10% Dakota/Minnesota crop loss is highly important to US corn/soy end stocks and future CBT prices. And this assumes that every other Central US state can produce at their state averages.

Our point is that the funds can continue to sell corn on the prospect of Midwest rain, but the downside CBT price risk is modest – even if NASS finds an extra 2-3 Mil acres of US corn and 1 Mil acres of US soybeans. Do not underestimate the statistical importance of shrinking Dakota/Minnesota crops!

CBT open interest totals for Tuesday showed a fall of 42,259 contracts in corn, 508 contracts in soybeans, and 6,188 contracts in wheat.

In non-US world agricultural futures trade, August Malaysian palmoil futures closed 36 ringgits higher at 3,502 RM/MT. September Paris wheat futures are up €1.00/MT at €208.00. And China’s September Dalian corn futures lost $.01/Bu to $10.28 while September soymeal fell $1.10/MT to $531.50/MT.

Ethiopia issued a tender to secure 400,000 MTs of world wheat with a bidding deadline of July 19th.

The volume of overnight CBT trade is in decline amid heightened volatility. The extended US weather forecast offers diminished rain for the N Plains and NW Midwest with rising temperatures. Minn wheat will be the upside leader on tightening supplies. This is no place to make new sales!

North American Weather Pattern Discussion: The overnight forecast models are similar in their depiction of the US weather pattern; but they vary in the details of rainfall. And all forecasts place extreme heat over the Western US with record highs set for California and the Interior West next week. ARC continues to worry that this heat will progress eastward in July.

The GFS model has shifted 1.00” rainfall eastward by some 150-200 miles that leaves Iowa on the short end with amounts of .75-1.50” while Illinois/Indiana/ Missouri receive 1.50-4.00”. The eastward shift is important as it produces limited rains across the Dakotas, Nebraska, and Minnesota.

The EU model’s rainfall forecast is like yesterday with 2-5.00” across Iowa/ Illinois. It is keeping the heavy and needed rain across Iowa.

The models are struggling in forecasting convective rainfall activity from T storms. Recent history would suggest that some areas do see the heavy rainfall while others are short changed. There is no doubt that all the models leave the Canadian Prairies and Northern Plains in a deepening and dire drought. The extended range forecast offers that the Western US Ridge progresses eastward in July.

Change in the GFS 10 Day Rainfall Estimate from Midday Tuesday: 

GFS 1o Day Rainfall Forecast into July 3rd: Heavy Rainfall Shifted South and East;

6-10 Day Mean Temperature Anomaly for June 28th-July 3rd:  Extreme Heat W Canada and W US:

EU Model Holds onto Wetter Bias for Iowa and Northern Illinois: 

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