7/29/21

Morning Commentary 7/29/21

CBOT Higher with Chicago Wheat Back Testing $7.00 Resistance; Yields fall 40% in Spring Wheat Tour; Palmoil Futures Soar to Test Highs

6:30 CT CBT Prices: Nov soybeans are up 7.25 cents at $13.6875, Dec corn is up 1.25 cents at $5.5025 with Sept Chi wheat up 7.00 cents at $6.9575.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT futures are slightly higher as the Russian crop estimate was cut by a Gov’t forecaster while longer range Central US weather offers the return of heat to the Central US in the 10-15 day period. The message from the primary weather models is that a high pressure Ridge is going to hold across the Central US into mid-August, it’s just a question of where and at what amplitude? This implies that US crop condition ratings and yield prospects will decline, it’s a question of degree and exact location of several Ridge riding storm systems?

 Day 2 of the Wheat Quality Tour estimated North Dakota spring wheat yields at 24.6 BPA, down 40% from the 5 year average and down 42% from the last time the tour was conducted in 2019. No Spring Wheat Crop Quality Tour was held in 2020 due to Covid-19. The Tour will continue sampling fields today in NE North Dakota and announce their final crop estimate this afternoon. The Tour has confirmed the worst-case scenario for the US 2021 HRS wheat crop.

The Russian State weather forecaster cut its estimate of the total Russian grain crop by 3 MMTs to 121 MMTs citing hot/dry weather in the Volga Valley. Harvest wheat yield data argues for a final Russian wheat crop of 75-79 MMTs. This total is well down on the WASDE crop forecast of 85 MMTs which along with expanding demand from Iran/Pakistan and Turkey, argues for a rather dramatic tightening of world wheat exporter stock/use ratios. Wheat has become the recent bull leader at the CBT as it quickly needs to extract itself from feed rations around the world. This leaves corn to be the main feed ingredient again – which will soon start to push world demand back at the US.

FAS/USDA will be out with their weekly export sales report this morning. The report is expected to reflect slow US sales of corn/soybeans/soyoil once again as South America fills world demand their cheaper price offers. Most traders are looking for CBT weakness following the report to buy the market heading into an important Central US weather weekend with US crop ratings to fall on Monday. This week’s oppressive heat/dryness really took a toll on crops.

September Malaysian palmoil futures rose 113 ringgits to 4,583 RM/MT with values back to testing prior all-time highs. The recent rally is extremely impressive with SE Asian palmoil stocks unable to seasonally rebuild. Paris Sept wheat futures are up €2.50/MT at €218.75 on declining Russian wheat production and its expanded export opportunity. And Dalian Sept corn closed $.01 lower at $10.08/Bu while Sept meal gained $4.50/MT to $551.00/MT. The financial support offered to China’s pork industry is brightening meal demand.

Weekly Malaysian Palmoil Spot Futures Chart; Testing All Time Highs!

CBOT open interest continues was mixed on Wednesday. Corn and wheat open interest gained 4,510 contracts and 1,072 contracts, respectfully. Soybeans open interest fell 5,348 contracts.

Canada keeps securing US corn as traders understand the budding export opportunities for US corn/soy in 2021/22. Seasonal lows came in early July, and the downside price risk is becoming limited as world wheat prices rise, and China is expected to start securing US soybeans for October forward in August.

North American Weather Pattern Discussion: The forecast models agree and are consistent with prior day runs, this keeps our confidence in the forecast high.

 A strong high-pressure Ridge that has created the record heat across the Plains and the NW Midwest has started to slowly weaken and push southward.

 The weakening Ridge allows for a front to pass through the Central US on Friday and the weekend with seasonal temperatures returning early next week.

Highs will retreat from the oppressive 90’s to lower 100’s to more seasonal 80’s to low 90’s. However, the break in temperatures is limited to 3-5 days with the forecast models rebuilding the Ridge/heat during the 8-12 day period across the Plains and the W Midwest. There is no evidence that the Ridge is going to be leaving the Central US during August.

The attached 10-day rainfall map is from the EU model. A band of rain will be produced from E Dakota thru SW Iowa and Missouri on Friday/Saturday. Rain totals are estimated in a range of .25-1.00”. ARC estimates that 35-40% of Midwest crops will see rainfall in the next 10 days. The extended range 10-15 day forecast returns a drier profile as the mean Ridge position sets up across the W Midwest. This is a concerning pattern for US crop yields.

Same Temperature Pattern as the Past 2 weeks; Heat across the Plains and the NW Midwest:

Rains Target Iowa While Leaving the Remainder of the W Midwest Arid: 

11-15 day  GFS Long Wave Pattern; Central US Ridge Returns

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