Morning Commentary 7/1/21

NASS Inspired CBOT Rally Persists Overnight; Brief Soy Break on China President Xi; N Plains/NW Midwest Forecast Drier/Warmer Next 2 Weeks

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

6:30 AM CT CBT Prices: Nov soybeans are up 10.00 cents at $14.09, Dec corn is up 13.50 cents at $6.03 and Sept Chi wheat is up .50 of a cent at $6.80.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT grains futures are higher based on a drier/warmer weather forecast for the N Plains and the NW Midwest following Wednesday’s bullish NASS June Stocks/Seeding Report. December corn has pushed back above $6.05 while November soybeans have scored new rally highs at $14.165. Wheat has followed in sympathy.

Initial overnight selling in the soy complex evolved from a hardline speech from Chinese President Xi in a commemoration speech celebrating China’s 100 years of communism. President Xi spoke on China’s resolve to stand up to foreign pressure while laying out their national aspirations including the incorporation/return of Taiwan. The news sparked initial selling in a host of financial markets, but values recovered as new nearby action by China’s leadership is unlikely.

The bullish NASS June report will likely return managed money buying to the grain complex with open interest in sharp decline in late June. CBT soymeal open interest fell to its lowest level since 2009 on Tuesday. The NASS data argued for exceptionally tight 2021/22 US corn/soybean/wheat stocks for another year with adverse weather sparking the opportunity for a sharp rally.

CBT corn open interest rose 10,686 contracts, soybeans 10,421 contracts, and Chicago wheat 3,306 contracts on Wednesday. The 3 primary CBT grain open interest rise was the 1st back to mid-June and suggests new speculative buying.

Brazilian farmers tell ARC Brazil that it will take another 5-7 days to fully assess the corn crop loss from the hard freeze on Tuesday/Wednesday mornings. Initial corn crop loss estimates range from 2-3 MMTs, but the quality loss could be more important in terms of the ability of Brazil to satisfy world corn export specifications. ARC Brazil sees a growing chance that the ’21 Brazilian total corn crop could be as low as 86-87 MMTs.

In world ag futures trade, August Malaysian palmoil futures rose 101 ringgits to 3,793 RM/MT following probable canola crop losses in Canada due to extreme heat/drought. September Paris wheat futures are up €1.75 to €211.00. China’s September Dalian corn futures rose $.045/Bu to $10.435 while September soymeal rose $18/MT to $561/MT. The sharp rally in CBT soymeal futures pushed China’s hog operations to be more aggressive in covering future demand. China’s meal rally is offering margin gain for China’s crush industry.

The overnight Central US weather forecast is warmer/drier for the N Plains & the NC Midwest than prior day runs. The forecast models have eliminated (GFS driest) the chance for rain on July 7-8th across the N Plains/Minnesota. Temps will be warm to hot with numerous days of 90’s to lower 100’s. The combination is likely to maintain a trend of declining US crop condition ratings.

The CBT will be closed on Monday and not reopen until Tuesday at 8:30 AM CT.  The 3-day weekend adds to the weather risk in the marketplace. July is the key month for corn pollination and new highs in December futures are forecast. The weather trend of drought across the N Plains and W Midwest is likely to persist during July raising the risk of a sharp fall in US corn/soybean yield potential.

North American Weather Pattern Discussion: The primary weather models agree on the forecast for the next 7 days. The forecast models have sharply diminished or eliminated a chance of rain for the N Plains and Minnesota next week as a tropical system makes landfall across Western Florida and steals needed upper air moisture from a weak cold front passing through the NC US. Florida appears to the target of a new tropical system (named Elsa) in the SC Atlantic. The drier forecast for the N Plains and the NC US will deepen the drought and crop stress with developing heat starting on the US holiday weekend.

The attached 10-day rainfall graphic is from the GFS model. A generally arid trend is forecast for the N Plains and NW Midwest into July 11th. The Canadian Prairies are included in dry trend with just a few storms over Alberta. The American west stays in a dire drought with extreme heat forecast after July 7th. Another heat dome is forecast to form according to the EU model. The N Plains and the NC Midwest will endure numerous days of highs in the 90’s with a few lower 100’s.

The best rain chances are across the Gulf States, the Delta, and the E Midwest in coming days. And heavy rains will be put down by Elsa across the Eastern US shore.

10 Day GFS Rainfall Forecast - Limited Rainfall for the N Plains and the N Midwest into July 11th.

Change in the 10 Day Rainfall Forecast from Wednesday at Noon: Drier across N Plains and Minnesota:

2 Week Temperatures Anomaly: More Extreme Heat for Western and Northern US/Canadian Prairies:

Day 10 Temperature Anomaly from Cluster Modeling: Extreme Heat Persists for same area:

11-15 day Precipitation Anomaly for North America: Dryness Worry Grows:

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