Morning Commentary 7/2/21

CBT Adds Weather Premium To Price Ahead of 3 Day US Holiday Weekend; Biggest Weekly US Corn Gain in Decade; China Meal Soars

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

6:30 AM CT CBT Prices: Nov soybeans are up 10.25 cents at $14.0575, Dec corn is up 4.00 cents at $5.93 and Sept Chi wheat is up 1.50 cents at $6.67.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT grain futures are higher overnight as traders look forward to a 3-day weekend. The CBT is closed on Monday for the July 4th holiday and will not reopen until Tuesday at 8:30 AM CT. Based on this 3-day holiday weekend there is always the risk that US weather forecasts could change. ARC expects that Tuesday’s opening will be sharply higher lower based on the latest Central US weather forecast. Price action on the CBT today will all be about July 5-20 weather.

The primary weather models are consistent with recent day runs offering limited rainfall to the Northern Plains and the Northern and Central Midwest. The below normal rainfall and warming temperature trend (highs returning to the upper 80’s to the upper 90’s) will stress corn/soybeans in the drought areas of the Northern Plains and the Western Midwest where top and subsoil moisture is short to very short. Remember that corn moisture needs increase dramatically heading into and beyond pollination with the weekly draw at nearly 1.75”. Crop condition ratings will continue to drop across the N Plains and W Midwest where rainfall in the past week has been limited. The forecasts maintain this arid rainfall trend into mid-July.

Based on current futures values, this is the biggest weekly gain in corn prices in a decade. Spot CBOT corn futures are up over $.87/Bu this week based on the 2-4 MMTs Brazilian corn crop loss due to a hard freeze and the lower-than-expected rise in US ’21 corn seeding. And the market is aware that nearly all the gain in ’21 US corn seeding occurred in the N Plains and Minnesota, where the crop is a growing risk of drought losses due to acute stress.

Amid the Pacific Northwest, N Plains and NC US drought, there is the risk that WASDE could adjust either yield or harvested acres down in their July 12th report. ARC Research leans that WASDE will cut harvested acres based on the growing prospect of elevated abandonment and failed acres. In 2012 WASDE cut US corn yield by 20 BPA, but such a cut is not justified by crop condition ratings. ARC looks for another fall in ratings next week of 1-3% in the GD/EX category, but the 2021 drought is more regional when compared to 2012. Therefore, we expect that WASDE could opt to cut harvested acres to account for the growing prospect of a small 2021 US corn/soybean harvest. NASS is conducting an on the ground survey to account for yield/harvested acres.   

CBT corn open interest rose 9,189 contracts and soybeans 4,357 contracts, while Chicago wheat fell 8,946 contracts on Thursday.

 In world ag futures trade, August Malaysian palmoil futures rose 71 ringgits to 3,864 RM/MT. September Paris wheat futures are down €2.00 to €207. China’s September Dalian corn futures rose $.03/Bu to $10.465 while September soymeal rose $15/MT to $576/MT. China’s spot crush margins are back in the black!

Drought losses look to mount without a Central US pattern change. ARC’s view stays bullish on building supply losses amid a poorly covered end user and importer. The ongoing drop in Brazil's corn production is a big deal as their export pace will suffer amid rising domestic feed prices. The risk remains the upside with end users to use any weakness early next week for new purchases.

North American Weather Pattern Discussion: The primary weather models are consistent and agree on the Central US weather forecast for the next 12 days.

The forecast models offer limited rain across the N Plains, and Western and Central Midwest. The lack of rain along with warming temperatures (numerous days with 90’s) will add crop stress across the N Plains and the North Central US. Near to below normal rainfall is offered for the E Midwest, but temperatures will average near to below normal and following recent rains, the cooler temperatures will aid corn pollination.

 Western Florida is the target of hurricane Elsa which is located today in the SC Atlantic. Elsa will steal upper air moisture from the Gulf and maintain warm to hot weather over the NW and NC US.

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 12th. The Canadian Prairies are included in dry trend with just a few storms over Manitoba. The western half of the US says in a dire drought with extreme heat forecast after July 7th. Another heat dome is forecast to form sparking record highs next week. And the N Plains and the NC Midwest will endure numerous days of highs in the 90’s with a few lower 100’s. This is a stable/concerning pattern.

GFS 10 Day Rainfall Forecast: Limited Rain totals for N Plains and Upper Midwest:

Precipitation Change from 12z (Noon) on Thursday: Hurricane Elsa Path Shifts Slightly West

Broad Area of Above Normal Warmth for Northern and Western US: 

Day Temperatures Forecast with High Confidence from Cluster Model Set: 

11-15 Day Forecast for Precipitation Anomaly: Dryness for Most of Central US

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