7/9/21

Morning Commentary 7/9/21

CBT Corn Falls into Support Below $5.20 Dec on Iowa Rainfall; Biden Takes on Big Business; Canadian Drought Worsens

6:30 CT CBT Prices: November soybeans are up 1 cent at $13.205, Dec corn is down 4.00 cents at $5.1975 with Sept Chi wheat down 1.50 cents at $6.165.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT futures are mixed overnight with corn futures dropping to new lows for the decline amid the storms occurring across Iowa and resulting needed rainfall. Wheat futures are following corn lower with soy futures holding on the potential for a new round of flooding across portions of Missouri/Illinois. Soybeans do not like wet feet. Palmoil futures also closed sharply higher – supporting soyoil.

AgResource looks for a mixed CBOT trading session to end the week. The rain for Iowa was desperately needed but amounts for the corn/soy areas of North Dakota, South Dakota and Minnesota will be modest over the next 2 weeks. The drought here will deepen and of a longer-term concern is the formation and amplification of a high-pressure Ridge across Colorado. This Ridge will shove a weak jet stream northward into N Canada and maintain an arid/hot weather trend for the Plains and the NW Midwest.

The key question for the market at what price is the Iowa rains discounted, and can the dry/warmer extended range forecast be supportive? The USDA July WASDE report is Monday and weather forecasts beyond this report will be key. A year ago, a flash drought in late August had a big impact on US corn/soy yield.

The macro financial markets are rebounding with DOW futures forecasting a 200 point higher opening. China’s Central Bank announced that it will cut the amount of cash that most banks must hold in reserve and tolerate an inflation overshoot. European banks offered like statements this morning suggesting that world interest rates will stay lower for longer. This has fund managers revisiting the reflation trade with the price of more risky assets likely to outperform in the coming quarters.

US President Biden and USDA Sec Vilsack in Iowa will be announcing and signing executive orders today taking on big business both in agriculture and the technology fields. Railroads are in the crosshairs of the big business fight with ag transportation rates in question. The political skirmish is not expected to have an impact on ag values on the various futures exchanges.

In world ag futures trade, September Malaysian palmoil futures rallied 123 ringgits to 3,892 RM/MT. September Paris wheat is down €1.00 to €200.75/MT. China’s Sept Dalian corn fell $.01/Bu to $10.12 while Sept meal rose $1.10/MT to $553.60.

Weekly Crop Reports from the various Canadian Provinces reflect a worsening drought outlook with crop conditions/yield potential in fast retreat. Canola, spring wheat and feed crop production estimates are being slashed. Imports of Canadian wheat, corn and oilseeds will be cut with Canada’s lost export demand being shifted the EU, Black Sea on wheat.

Last week’s CBT corn/soybean rally was the largest in a decade with this week’s decline the largest in a decade! The volatility is remarkable. ARC’s bullishness is based on US demand. End users scale into purchases on weakness.

North American Weather Pattern Discussion: The GFS model remains the wettest for Iowa and the remainder of the Midwest, but there is broad agreement in the forecasts this morning which raises our confidence in their solutions.  Showers/storms have already formed across Iowa overnight with the system to shove south and east through the day. Flood warnings are out for far Southern Iowa and Northern Missouri with rain totals of 2-4.50”. The Missouri area was saturated 2 weeks ago by 3-6.00” of rain, and soils here are still wet.

Iowa and E Midwest 10-day rainfall totals will be in a range of .5-3.50” with locally heavier amounts. Some low-level flooding will be possible in Illinois and Indiana where rain totals exceed 3.00”. Central Illinois must be monitored for low level flooding with rains over 4.00”.

The 10-day rainfall graphic is from the EU model. ARC’s biggest weather concern is a deepening drought across the Canadian Prairies, the US Plains and Minnesota. The extended range EU and GFS Ensemble forecast models place the strong high-pressure Ridge over Colorado and lift the Jet Stream northward allowing Western US heat to spill eastward. The extreme Western US drought will push east into the Central Plains and  the Western Midwest heading into August.

EU Model 10 Day Rainfall Forecast:

Extreme Heat Returns in the 11-15 Day Period for N Plains:

2 week Temperature Anomaloies; Heat for Western and Northern US:

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