6/28/21

Morning Commentary 6/28/21

CBT Rallies in New Week; NASS Reports Due Wednesday on Stocks/Seeding; China Bids for Domestic Pork and GASC for World Wheat

6:30 AM CT CBT Prices: July soybeans are up 14.25 cents at $13.44, July corn is up 6.50 cents at $6.43, and July Chi wheat is up 11.00 cents at $6.48.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT futures opened mixed to higher to start the new week and then added to their gains following the release of the North American weather forecasts. A dry and warming weather forecast is offered for the N Plains and the NW Midwest into mid-July. Crops in this area are short to very short of soil moisture which will to the risk of falling yield potential during July.

Minneapolis spring wheat paced the rally with gains of 23 cents and forged a new contract high at $8.46 basis July. The prior high was set on June 7th at $8.435. Summer row crop rallies have been muted ahead of Wednesday’s NASS Stocks/Seeding Report as traders are reluctant to add to their market risk.

Minneapolis Wheat at Highest Price since June of 2013!

Friday’s CBT open interest totals showed a decline of 35,664 contracts in corn, 40,671 contracts in soybeans, and 5,878 contracts in wheat. The big fall in Friday’s corn and soybean open interest speaks to massive long liquidation.

World financial markets start the week little changed. The DOW is expected to open down 10-20 points and hold near record levels while spot WTI crude oil futures are off $.10 at 74.03 while the US dollar steadies ahead of the Friday’s July US Jobs Report.

AgResource looks for this week’s US corn/soybean crop conditions to hold steady or improve 2% in the GD/EX category while spring wheat ratings fall further to just 24-26% GD/EX. Spring wheat drought stress is acute.

The lowest offer to GASC for late August-September 5th wheat was $242.93/MT for Romanian wheat fob. However, remember that GASC canceled a tender in mid June on 6-year high freight rates. It will be the cost of the freight as much as the wheat that will determine if GASC makes a purchase today.

China announced that it will start securing domestic pork supplies to stabilize prices for its state reserves. Hog prices have recently plunged 65% from January into June on rising supplies. The last time that China’s Gov’t bought domestic pork for its reserve was back in March of 2019.

In non-US world agricultural futures trade, August Malaysian palmoil futures fell 11 ringgits to 3,590 RM/MT on the sharp slide in US soyoil futures on Friday. September Paris wheat futures are up €1.50/MT at €203.00. China’s September Dalian corn futures rose $.02/Bu to $10.31 while September soymeal fell $3.60/MT to $533.00/MT. China’s soybean crush margins should improve thru the summer based on a seasonal bottom in China’s cash hog production margin.

The North American weather forecast offers a return of the May/FH of June weather pattern in July with a high-pressure Ridge limiting rainfall from Iowa north and west into the Canadian Prairies. Extreme heat will return to the N Plains and the NW Midwest beyond July 4th with highs in the 90’s/lower 100’s. Spring wheat, soybean and corn crop yield risks will be rising during July.

NASS June Crop Reports loom on Wednesday, but it does not require much of a US corn/soy yield loss for a push back to the prior contract highs.  The June Stocks/Seeding Report will take away the risk of traders wanting to return to the Long Side of the CBT.

North American Weather Pattern Discussion: The 3 primary weather patterns agree that the old May/FH June weather pattern is returning. A strong high-pressure Ridge will hold across NW Canada and the NW US over the next 2 weeks. This will produce record heat for the Pacific Northwest – with 90’s and lower 100’s returning to the N Plains and NW Midwest in the 7-10 day period.

Dry weather will prevail from Iowa north and west, which includes - Nebraska, Kansas, Wisconsin, Minnesota, and the Dakotas. The drought will become extreme over the American West including the Oregon and Washington. And the Canadian Prairies are included in this hot/dry pattern worsening their crop conditions.

The attached 10-day rainfall graphic is from the European model. Above normal rainfall will include the Southern 1/3 of including States from New Mexico/Texas and the Gulf States, while the drought deepens across the Western and Northern US.

Heat will surge from the Pacific Northwest late week and as the high-pressure Ridge elongates, it will include the Northern Plains and the NW Midwest. By July 4th, much of the N Plains and the NW Midwest will be back in the 90’s. ARC remains concerned that this weather pattern will persist during July.

10 Day Rainfall Forecast from the European Model into July 8th:

11-15 day Rainfall Anomaly into July 13th; Same Weather Pattern Holds.

Extreme Heat for Western US and W Canadian Prairies Shifts Eastward in early July:

Cluster Modeling Argues for Extreme Heat to Locate NC Midwest July 8-13th:

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