Morning Commentary 7/7/21

CBT Rebounds on NASS Condition Report as Forecast Models Diminish Rainfall for N Plains/Minnesota; Russia to Export 37.5 MMTs of Wheat

6:30 CT CBT Prices: November soybeans $13.42 – up 37.0 cents, December corn at $5.43, up 3.25 cents with September Chi wheat at $6.3125, up 5.25 cents.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT corn futures initially fell on carry over long liquidation from Tuesday’s limit down settlement, but values quickly recovered on the steady or slight decline in US corn, soybean, and spring wheat crop conditions. And the primary overnight forecast models reduced their rainfall estimates for the driest areas of the Central US over the next 10 days – the Northern Plains and Minnesota. Also in a lasting dry weather trend are Kansas and Nebraska - states to be closely monitored.

CBT open interest totals for Tuesday’s trade showed a drop of 177 contracts in soybeans and 1,586 contracts in wheat, while corn open interest rose a surprising 1,115 contracts. The sharply lower CBT did not spark considerable or widespread liquidation. Either end users stepped forward and were buyers from the weak handed funds, or funds are maintaining their corn length.

The NASS weekly crop progress report showed US corn ratings holding steady at 64% GD/EX with conditions gaining in the east while declining in the N Plains and Minnesota. 10% of the US corn crop is silking compared to the 14% average. The bulk of the US corn pollination period will occur from July 10-25th.

US soy GD/EX ratings at 59% GD/EX were down 1% on the week and 12% from 2020.  The 59% GD/EX rating in soybeans was the 5th lowest since 1996 and leaves questions about the crop’s ability to reach trend yields at 50.8 BPA?

US spring wheat ratings fell to just 16% GD/EX with a sizeable 50% of the US spring wheat crop rated poor or very poor. This is the 2nd worst rated US spring wheat crop on record with only 1988, being worse. With 69% of the US spring wheat crop heading, the chance for rain/yield recovery are fading.

ARC expects that spring wheat farmers will abandon their worst fields with US HRS wheat yields likely to be down 40-60% from trend. Canadian spring wheat cannot be much better amid the recent acute heat/dryness across Saskatchewan.

The primary weather models have reduced rainfall chances for the driest area of the Central US, the N Plains/Minnesota over the next 10 days. Unfortunately, the drought looks to deepen here following the rains of the past 36 hours.  And even if US corn/soybean yields are record large across Illinois, Indiana, and Ohio, having the final US corn yield break the record at 176.6 BPA will be difficult. Soybeans are a crop of August and there are too many unknowns via weather to make any future yield assessment. The N Plains/Minnesota drought has taken the top end off US corn/soy yield potential, key will be the last half of July/August weather with just a modest yield loss producing a sizeable CBT rally. Big US corn/soybean yields are needed amid strong US corn and soybean demand.

In world ag futures trade, August Malaysian palmoil futures fell 90 ringgits to 3,830 RM/MT. September Paris wheat is up €1.00 to €199.25. China’s Sept Dalian corn fell $.05/Bu to $10.18 while Sept meal fell $8.35/MT to $553.30.

Russian Ag minister estimated that Russia would export 48 MMTs of all grains and 37.5 MMTs of wheat. This compares to WASDE which is forecasting that Russia will export 40.0 MMTs of wheat.

CBT market volatility is extreme, but a lasting bearish trend is unlikely on tightening 2021/22 US corn, soybean and wheat end stocks. Central US weather is far from perfect and new CBT corn/soy highs are forecast on any loss of corn yield below 175 BPA or soybeans below 49.5 BPA.  There just is no room for a US corn or soybean yield decline, which is why the CBT will be  ultra sensitive to each new daily weather forecast and weekly NASS Crop Condition score. US and world wheat futures are scoring their seasonal lows.  Soybeans offer the best risk vs reward amid enlarged Chinese world demand and their lack of US forward purchases.

North American Weather Pattern Discussion: Elsa is quickly advancing her forward progress and will soon be on shore as a weak category 1 hurricane. As Elsa quickly exits North Carolina late Thursday, she heads northeast to Newfoundland. Her exit will allow for improved model forecasting consistency.

The 3 primary models are similar and have diminished their rainfall potential for the driest area of the Central US – the N Plains and Minnesota. Iowa/ Missouri will receive welcome and needed rainfall with totals in a range of .75-2.50” over the next 10 days (heaviest east/lightest east). And rains of .5-2.50” will maintain favorable soil moisture for the Eastern/Southern Midwest. 

The nearby crop concern is a deepening drought across the Canadian Prairies, the US Plains and Minnesota. The acute American West drought look to push north and east into late summer. The extended range EU and GFS Ensemble forecast models place the strong high-pressure Ridge over Colorado and lift the Jet Stream northward allowing the Western US heat to spill east. This will produce a new round of extreme heat for the Plains and W Midwest from July 17-23rd. Iowa remains the swing state, but Kansas and Nebraska will soon be included in the drought prone states.

Dry Weather is forecast for the American West,  Northern US Plains, and the Minnesota. Iowa is the swing state in the forecast: 

Change in the EU Model Rainfall Forecast from Noon Yesterday over the next 10 Days: 

Above to Much Above Normal Temps for the next 2 weeks Across Canadian Prairies and Western US: 

6-10 Day Precipitation Anomaly July 12-17th: Below Normal Rain West

11-15 Day Precipitation Anomaly; Dry Weather for Plains and W Midwest: 

Want Updates?

Keep up with our market interpretation news and other important info. To receive text or email updates, simply click the button below and fill out the form.

Get Updates