CBT Falls on Taper Tantrum Talk from US Central Bank; Midwest Weather Forecast Holds Less than Desired Rain;Weekly Export Sales Report Due
6:30 CT CBT Prices: Nov soybeans are down 17.50 cents at $13.3575, Dec corn is down 6.00 cents at $5.59 with Sept Chi wheat down 9.00 cents at $7.285.
AgResource Morning Grain/Soy Comment & Analysis: Good Morning! It’s a risk off macro day as the minutes from the latest US Central Bank Meeting showed that that its board was willing to considering reducing its bond purchase program sometime later this year or in early 2022 as its 2% inflation target was reached. This would reduce the amount of liquidity that is provided to the US financial system. The insight caused the US dollar to rally to its best levels in 9 months and for most asset prices – stocks and commodities - to decline.
WTI October crude oil futures are down $2.21/barrel testing their lowest level since May at $62.66 while US stock market futures look for the DOW to open 200-250 points lower. European stocks are off 1.8% while Asian equities fell slid 1-2%. The Fed minutes did not show the potential for a rate hike until late 2022 or early 2023 as the labor market normalizes.
The bullish fundamentals of the US/world grain markets have not changed, its just that fund managers are getting smaller in their risk exposure across a host of asset classes. ARC Research expects that longer term that tightening world grain stocks of the major exporters will spark a rally to new highs. Its just that financial market tapering talk is sparking a risk off mentality.
China indicated overnight that the US/China were maintaining normal communication on trade and economic fronts. ARC is told that the Biden Administration is reviewing US/China trade policy but expects that China will adhere to its Phase 1 Purchase Pledge of US Ag goods.
The PF Tour estimated the Illinois corn yield at 196.3 BPA which is above last year’s 189.4 BPA and the 3-year average 184.4 BPA. ARC notes that NASS pegged the Illinois corn yield at a record 214 BPA in its August report.
The Illinois PF Tour soybean pod count was an average 1,280 pods in a 3 X 3’ square which compared to 1,247 last year and a 3-year average of 1,191 pods.
The W Iowa PF Tour corn yield was pegged at 192.1 BPA, well above last year’s 180.0 BPA estimate and the 3-year average of 184.3 BPA. Soybean pod counts were slightly above last year and the 3-year average.
The Pro Farmer Tour finishes later today in Rochester, Minnesota after surveying crops in the eastern half of Iowa and Minnesota. The PF Tour to date has largely confirmed the NASS August Crop estimates for corn/soybeans.
Malaysian September palmoil futures closed 62 ringgits lower at 4,356 RM/MT. Paris September wheat is down €3.75 at €244.50/MT. Dalian Sept corn lost $.07 to $10.15/Bu while September soymeal lost $4.45/MT to $556.95.
South Korea purchased 65,000 MTs of either South American or South African corn overnight while Jordan tendered for 120,000 of world wheat and received 2 offers. The Russian wheat tax is likely to rise thereby sending the price of world wheat higher with time.
It’s a risk off macro day with CBT grains under pressure. However, this is no place to make new sales amid less than favorable Central US weather with world crop sizes in decline.
North American Weather Pattern Discussion: The GFS/EU weather models are in fair agreement. The models have the North American weather pattern correct, but they are struggling with the exact placement of rain outside of the Northern Plains this weekend. ARC’s forecast lean is to the EU model which maintains a below normal rainfall pattern for most of the Midwest and the S. Plains. Uncertainty surrounds the location of rain beyond the next 6-7 days.
The best rains are forecast to drop across the Central Canadian Prairies where totals will range from 1-3.00” this weekend. Minnesota looks to be short changed as will most of Iowa in the next 6-7 days. The best chance for Iowa rainfall is the August 27-28th period.
High temps range from the 80’s to the mid 90’s across the N & C Plains and into the N Midwest into the weekend before a cooling trend develops. N Plains/W Midwest high temps decline to the 70’s to the 80’s while the rest of the Midwest and the Central Plains hold in the 80’s.
The 10-day rainfall graphic is from the EU forecast model. Notice that much of Kansas, Illinois, the eastern half of Iowa, and Indiana will miss meaningful rain. The 10-15 day forecast returns warmth/dryness to the N Plains/N Midwest.
EU Model 10 day Rainfall Forecast into August 29th; Less than Needed Rain for the E Midwest:
EU Model Maintains Arid Western US and E Midwest Weather into September 3rd:
Above Normal Temps Return following 4-5 Days of 80's/low 90's Next Week: