Morning Commentary 8/20/21

CBT Tries to Stabilize Following Thursday's Chart Based Lashing;Pro Farmer US Corn Yield Estimate Out Today;Argentine Wheat Dryness Troubling

6:30 CT CBT Prices: Nov soybeans are up 3.50 cents at $13.235, Dec corn is unchanged at $5.5075 with Sept Chi wheat up 2.50 cents at $7.30.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT futures are trying to recover from Thursday’s lashing as the Fed’s tapering of its bond buying program (later this year) triggered key moving average sell stops in corn/soybeans/soyoil. These sell stops added to the decline. CBT chart patterns are bearish, and it will be interesting to gauge if the CBT can hold its overnight gains?

The fundamentals of the CBT markets are bullish, but for short periods of time, charts and fund selling can rule the day. Wheat is the upside CBT leader based on the sharp falls in world wheat crops and am ongoing stream of trade demand. Corn follows wheat on the bullish ladder, but the market remains sensitive to US corn yield potential and the coming harvest. China is extremely short bought on forward soybean coverage and will secure US soybeans on nearly a daily basis with purchase tonnages enlarging on breaks.

AgResource warned of CBT choppiness following the August USDA Crop report with a secondary bottom to be formed in late August. ARC Research maintains this view. New highs to be scored in corn/wheat/soyoil futures during Q4.

Record low stock/use ratios for world wheat, corn and vegoils will spark new rally highs once the Central US row crop harvest is underway. ARC sees the CBT in a long-term bull market on US export demand & the need for more ‘22 acres. 

CBT open interest rose sharply on Thursday’s decline which argues that some of the faster moving funds entered new short positions. Corn OI was up 7,618 contracts, soybeans up 7,478 contracts with Chicago wheat up 5,729 contracts.

The PF Tour estimated the Iowa corn yield at 190.3 BPA which compares to NASS at 193 BPA and the Minnesota corn yield at 177.4 BPA which is well above NASS at 166 BPA. The big disappointment of this week’s PF Tour was the Illinois corn yield at 196 BPA. The PF Tour hints at a September US corn yield of 173-174 BPA which helps validate the NASS August estimate. Based on August fill weather, kernel depth is expected to be slightly less than normal. Pro Farmer will be out with their US corn yield estimate later today.

Malaysian October palmoil futures closed 15 ringgits higher at 4,371 RM/MT. Paris September wheat is up a strong €14.50 at €275.50/MT on tightening EU wheat milling supplies and a squeeze on the nearby futures. Dalian Sept corn lost $.11 to $10.04/Bu while September soymeal lost $4.60/MT to $552.35.

ADM and Marathon Petroleum formed a JV to use soyoil that will be exclusively used to produce renewable diesel. The N Dakota plant plans to open in 2023.

The CBT is choppy with secondary seasonal lows due before month end. ARC looks for US corn/soybean GD/EX ratings to slide another 1-2% on Monday.   This is no place to be making new sales.

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 rains outside of the Dakotas 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. Ill-defined rain occurs beyond the next 6-7 days. ARC notes that for key states like Iowa and Illinois, the best chances for rain does not occur until the last 3 days of August. This means that US crop conditions in both states could slip.

The best rains are forecast to drop across the Dakotas and W Nebraska this weekend where totals will range from .5-2.00”. The 10-day rainfall graphic is from the EU forecast model. Notice that much of Kansas and Missouri miss the rain into September. Iowa/Illinois and Indiana rains occur closer to the end of August with amounts in a range of .25-1.00”. August is going to end to be a drier/warmer than normal month for the Central US.

A cooling trend develops as cold front sags southward into late next week. Plains/Midwest high temps ease to the upper 70’s to the upper 80’s. Warmth returns in the 10-15 day period as a high pressure Ridge rebuilds across the western US once again.

Above Normal Temps to Linger Beyond the Middle of Next Week: 

Central US Weather Features Rain for the Dakotas this Weekend: 

Time to Start Watching South American Weather; No Rain for Argentina and NC Brazil next 10 Days

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