Central US Weather Too Dry Next 10 Days with Heat Abating Starting Thursday; World Crop Losses Mount; N Plains Wheat Tour Results
6:30 CT CBT Prices: Nov soybeans are down 1.75 cents at $13.5775, Dec corn is unchanged at $5.465 with Sept Chi wheat up 14.75 cents at $6.8875.
AgResource Morning Grain/Soy Comment & Analysis: Good Morning! Low volume and mixed is the overnight trade as the extreme heat of the past week slowly breaks into the weekend across the Plains and the W Midwest. More seasonal temperatures are offered this weekend with a cool bias for the Lake States and the E Midwest next week. There will be several rain chances of Midwest rain in the next 10 days, but unfortunately the coverage of rain will be across an estimated 35-40% of the Central US. This leaves vast Midwest areas with sharply falling soil moisture and a declining crop conditions and yield potential. The extended range forecast offers the return of an arid forecast for the 10-15 day period with warming temperatures. The weather forecast leans positive for the marketplace, but the back-and-forth of recent trading sessions has “worn out” both the bulls and the bears. ARC looks for a reversal of yesterday with a weaker trade early and a recovery into the close.
The 1ST day of the Wheat Quality Tour which measured HRS yield potential in Southern and Eastern North Dakota came back with a highly disappointing wheat yield of 29.5 BPA or down 32% from the 5-year average. The Tour group measured 100 fields with some fields likely to be abandoned on low yield potential.
North Dakota is the biggest producer of HRS wheat and concern is growing about the lack of world hi protein spring wheat after drought slashed yields across the Northern Plains/Canadian Prairies/Russia. Tour participants also reflected on the acute stress that drought is inflicting on corn/soybeans and other summer crops. The deepening drought will dramatically lower yield on all crops through the Dakotas. It’s now question of degree?
Bunge reported a 41% jump in profit today which followed a 52% rise in the profit of ADM yesterday based on strong US export demand and rising US crop values. The growing and massive loss of non-US crops such as Brazilian corn, Russian wheat and all crops in Canada raises the need for huge US corn/soy crops to fill record large world demand. ARC estimates a loss of 2 Bil Bu of non-US grain/oilseed production thru July. World importers/end users have been hoping for a seasonal price drop to take forward coverage, but the sheer size of the world crop loss prevents much if any decline.
September Malaysian palmoil futures fell 145 ringgits to 4,470 RM/MT in a correction of the strong 3-day rally to new contract highs. Paris Sept wheat futures are up €2.25/MT at €214.25 on budding export demand potential. And Dalian Sept corn closed $.03 higher at $10.09/Bu while Sept meal gained $6.50/MT to $546.50/MT. Soy crushers in China are becoming bullish on the growing off take of feed and improving margin of hog producers.
CBOT open interest continues to fall in the choppy market with wheat off 1,049 contacts, soybeans down 6,775 and corn off 2,704 contracts.
World supplies of 2021 grain/oilseeds are tightening on adverse weather which will shift additional export demand to the US. Massive US crops are required. Anything less sparks a dramatic rationing rally much like last year. The importance for favorable August weather across the Central US is growing on the pure loss of crop elsewhere.
North American Weather Pattern Discussion: The forecast models agree and are consistent with prior day runs, which keeps our forecast confidence high.
A strong high-pressure Ridge positioned over Colorado/Nebraska will weaken and retrograde south and west in the coming days. This allows for a front to pass through the Central US on Friday (and the weekend) with seasonal temperatures. Highs will retreat from the oppressive 90’s to lower 100’s to seasonal 80’s to low 90’s. The cooler temps and southward push of the Ridge allows for several bands of rain as systems ride over the top of the Ridge.
One band of rainfall will stretch from E Dakota thru SW Iowa and Missouri on Friday. Rain totals are estimated in a range of .25-1.00” with locally heavier amounts. Rains are also forecast through the Lake States in the next 36 hours. Showers are already falling across Central Minnesota this morning. ARC estimates that 35-40% of Midwest crops will see rain in the next 10 days. The 10-day rainfall graphic is from the GFS model. The problem is that this leaves 60-65% in a dry state with sharp falls in soil moisture.
The extended range 10-15 day forecast returns the heat to the Plains and the W Midwest with below normal rainfall trend. The yield debate of the east vs the western (Midwest) will sharpen in August as dry/warm weather holds westward of the Mississippi River.
GFS 10 Day Rainfall Forecast: Drier Conditions from the N Plains through Illinois:
Above to Much Above Normal Temperatures for Western half of the US Crop Area:
1o Day Percent of Normal Rainfall Shows Deepening Soil Moisture Loss: