Morning Commentary 7/22/21

Wetter EU 11-15 Day Ensemble Model Pushes Weather Algo Systems to Sell CBT;GFS Disagrees & is Hot/Dry;Black Sea Forecast Turns Hot/Dry

5:30 CT CBT Prices: Nov soybeans are down 21.25 cents at $13.6525, Dec corn is down 13.00 cents at $5.5525 with Sept Chi wheat down 17.00 cents at $6.94.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT futures were sharply lower overnight as algo weather trading systems sell based on the prospect of rain in the extended 11-15 day US forecast period. Wheat, corn and soybean futures are sharply lower as a result in moderate volume.

 As ARC commented in the PM wire yesterday, the extended EU Ensemble model offered improved rainfall chances in the 11-15 day period as it takes the high pressure Ridge to the SW US. The GFS Ensemble model holds onto the dry weather trend for the Plains and the W Midwest with the Ridge position over the South Central US. The GFS 16-20 day Ensemble forecast is also dry/warm for the first half of August. The EU Ensemble Weekly forecast is available later this afternoon. The extended range models are split in the extended forecast.

GFS Ensemble Forecasting  Drying Weather for the Plains and W Midwest into August 6th: 

EU Model Ensemble Forecasting Rains for the E Midwest in the 11-15 Day

GFS Ensemble Model Forecasting No Change in the Pattern into August 10th: 

 The skill score for any forecast longer than 10 days goes to the European model, but the accuracy of any extended range forecast is low and in the case of summer Central US weather and rainfall projections, its exceptionally poor.

 Yet the weather algo trading systems are set up to trade net forecast changes and they were sellers following the release of the European Ensemble forecast. Whether their positioning is right will only be known in the coming days.

Ahead of the potential rain in the EU’s model’s 11-15 day forecast is 10 days of arid weather conditions with extreme heat for the Plains and the W Midwest with high temps ranging from the 90’s to lower 100’s. This forecast has not changed with the Operational EU model forecasting an amplified high-pressure Ridge across the Plains/W Midwest on Day 10! This EU Model Operational Ridge position makes the EU Ensemble forecast - questionable.

AgResource Research would argue that traders would be better off trading the 1-10 day vs the 11-15 day forecast, but in the world of weather aglo trading systems, its either white or black (buy/sell) and it’s a sell day. The coming heat/dryness is likely to pull US crop condition ratings lower and push crop maturity to the detriment of yield. Based on the high variability in the extended range forecast, CBT price volatility will stay high into next week.

Rains fell Tuesday with totals of .2-1.00”, but another lengthy period of hot/dry weather is ahead for Ukraine and European Russia. Corn and other summer row crops will be stressed by the ongoing lack of rain.

 September Malaysian palmoil futures has lost 3 ringgits at 4,257 RM/MT. Paris Sept wheat futures are down €3.75/MT at €210.00. Dalian Sept corn closed $.01 lower at $9.90/Bu while Sept meal lost $6.00/MT to $561.80/MT. 

Russian sources are openly discussing a 2021 total Russian wheat crop that could be below 80 MMTs. Tight fisted farmer holding and falling production totals has rallied Black Sea wheat prices.

The weekly US export sales report is out this AM with other news limited. The nearby 10 day forecast is threatening with hot/dry weather for the N Plains and the Midwest. Confidence the extended range weather forecast is poor/low. This is not a break to sell.  The extended range forecast is always changeable and our confidence in its forecast is low - especially with the GFS warm/dry, while the EU model is cooler with some rain.

North American Weather Pattern Discussion: The forecast models agree and are consistent with prior day runs. A strengthening Central US High Pressure Ridge becomes static and produces an extended period of hot/dry weather. Extreme heat builds south and east from the N Plains over the next 2 weeks. Widespread 90’s to lower 100’s will be featured across the Plains and the W Midwest. Slightly cooler upper 80’s to mid-90’s will the theme across the E Midwest. ARC notes that such heat will push crop maturity into early August.

As has been the case for the past 5 days, the Plains and the NW Midwest will endure extreme heat with highs ranging from 95-109 degrees. This extreme heat will produce acute crop stress across the Dakotas, Nebraska, and Kansas.

The 10-day rainfall graphic is from the EU model. The Plains, W Midwest and the and the southern 2/3’s of the E Midwest hold in an arid trend. The best chance of rain will be from Ridge-riders that cross over the top of the Ridge and drop SE through the Lake States. ARC expects that E Minnesota/Wisconsin/ Michigan will be the prime targets.

The GFS Ensemble forecast maintains the dry weather pattern for the Plains/W Midwest while the EU Ensemble would return .25-1.00” of rain to the C and W Midwest. Our confidence with either forecast this far out is low.

EU Model 10 Day Rainfall Forecast: Broad Dryness Plains thru E Midwest: Only a f ew Ring of Fire rains:

10 Day Percent of Normal Rainfall; Shows Growing Soil Moisture Declines:

15 Day Temperature Anomaly; Extreme heat from Canadian Prairies into the W Midwest:

Several Rounds of Extreme Heat with the 1st being from July 24-28th: 

August 1st Temperature Forecast for Plains/W Midwest: Widespread 90's/low 100's: 

EU Operational Model Ridge Placement on Day 10 - August 1st.; Hot/Dry Central US: 

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