Morning Commentary 7/23/21

CBT Mixed as the 11-15 Day Weather Debates Persists;W Midwest/N Plains Crop to Hit Wall by early August without Rain; Palmoil Futures Soars

6:30 CT CBT Prices: Nov soybeans are down 7.50 cents at $13.6525, Dec corn is down 3.00 cents at $5.5825 with Sept Chi wheat unchanged at $6.9225.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT futures are mixed overnight as the weather model debate extends into the weekend. ARC looks for a mixed session as the duration of Central US heat/dryness is debated against a backdrop of sliding US crop ratings on Monday. The next 10 days of hot/dry weather will produce considerable crop stress – will the rains arrive in August to brighten/revive US yield prospects? That’s the question!

 The CBT has been acutely focused on US weather in recent trading sessions. World crop production is sliding due to the dire drought across Canada, the excessive rains across Europe and China, the freeze damage on Brazilian winter corn, and falling Russian crop prospects. All have elevated the importance of US corn/soybean yields in bridging a potential world shortage. Many times, ARC Research has reflected on the record low stock/use ratios of world corn, wheat and oilseed exporters. The loss of 6-9 MMTs of Canadian canola is a big deal!

Due to the algo weather trading systems, the extended 11-15 day forecast has been driving CBT price direction. The 10-day forecast has been consistent with a Central US high pressure Ridge that focuses hot/dry weather on the Plains/W Midwest. Iowa’s last meaningful rain was July 14th – 9 days ago.

And Based on both GFS/EU forecasts, another 10 days of hot/dry weather lies ahead for Iowa, and the remainder of the W Midwest and the Plains. This makes early August rains extremely important to prevent an acceleration in crop condition rating declines and yield losses. The early August rains are highly important in deciding 2021 US corn/soybean yields potential.    

The EU operational (day 10) and the ensemble model retrogrades the Central US high pressure Ridge southwest due to a strong Trough that forms over E Canada. This allows for more seasonal Central US temps and improved August rains.

The GFS operational and ensemble models are less amplified with the Eastern Canadian Trough and hold the Ridge across the Central US extending the hot/ dry weather into August 7th, detrimental to crop yields. ARC’s Climate Scientist – Dr Scott Yuknis believes that the GFS Ensemble model has the right handle on the North American weather pattern due to a developing negative arctic oscillation (-AO) which the EU model is seeing. But during the summer, the influence of a -AO is far less, which is why the US GFS Ensemble model is the preferred forecast beyond the next 10 days. The Trough will be weaker.

September Malaysian palmoil futures rallied sharply to gains of 160 ringgits/ MT to 4,417 on tightening stocks. Paris Sept wheat futures are up €1.50/MT at €211.50. Dalian Sept corn closed $.01 higher at $9.91/Bu while Sept meal lost $11.00/MT to $550.80/MT. A Reuters story is making the rounds on how negative China’s hog margins are and the bearish impact on soy crush and meal use.

Northern Plains/W Midwest crops will hit the wall in August if the rains do not arrive as suggested by the EU Ensemble model. It’s a back-and-forth day as the industry debates long range weather forecasts and US crop yield potential.

North American Weather Pattern Discussion: The forecast models agree and are consistent with prior day runs for the next 10 days but disagree thereafter.

The GFS/EU models agree that a strong Central US High Pressure Ridge which produces 10 days of hot/dry weather. Extreme heat builds south and east from the N Plains with widespread 90’s to lower 100’s featured for the Plains and the W Midwest. Slightly cooler upper 80’s to mid-90’s occurs across the E Midwest. Such extreme heat will push crop maturity into August. Its not only the daytime extreme heat across the Plains and W Midwest, but it’s also the warm evenings that will limit the ability of corn to respirate.

The 10-day rainfall graphic is from the EU model. The Plains, W Midwest and the and the southern 3/4’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 of Minnesota/Wisconsin/ Michigan. Otherwise, the Central US is dry.

The GFS Ensemble forecast maintains the hot/dry weather pattern into August 7th. A below to much below normal rainfall pattern persists with high temps in the 90’s to lower 100’s. The EU model differs by shifting the mean Ridge position to the SW US. It offers showers across the N Plains and N Midwest and more seasonal temps. Our bet is the GFS Ensemble is right amid consistency.

All Models Agree on Extreme Heat Next 10 Days during Hottest Period of the Summer: 

10 Day EU Weather Model Rainfall Forecast; Limited totals in the Plains and W Midwest: 

GFS 10 Day Rainfall Forecast; Limited Rain Across the Plains and the W Midwest: 

EU Weather Model Shifts the Mean Ridge Position further West due to Developing -NO pattern; Less Important in Summer; Cooler with Some Midwest Rain

GFS Model has Central US Ridge and Continued Dry/Hot pattern for Central US:

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