8/27/21

Morning Commentary 8/27/21

CBT Retreats on Overnight Rain for Iowa/Minnesota; China Continues to Book US Soybeans; Jackson Hole Friday, What will Powell Say?

6:30 CT CBT Prices: Nov soybeans are down 8.00 cents at $13.1825, Dec corn is down 3.75 cents at $5.47, with December Chi wheat unchanged at $7.3925.

AgResource Morning Grain/Soy Comment & Analysis: Good Morning! Mostly lower are CBT values as the best rain of the growing season fall across Minnesota/ Iowa overnight with the debate ranging as to how much yield benefit the moisture produces? It seems that nearly everyone agrees that soybean seed size could be boosted, but the yield help to corn will be minimal. In recent days, overnight selling due to green radar blobs has produced daytime short covering. Traders will be alert for that trend again to end the week.

Today is known as Jackson Hole Friday as the US Central Bank Chairman Powell prepares to deliver his remarks on the state of the US economy and potentially any future policy moves. The financial markets will closely follow his virtual presentation with the timing of a tapering of bond purchases in play.

US stock futures are higher with DOW futures up 85 points while crude oil gains $1.10/barrel to $68.52 basis October, and the US dollar is slightly lower. It’s the reaction of the US dollar that will be the most important for the CBT markets as the expectation of a longer term drop in the greenback has some fund managers looking more closely at long commodity plays. ARC notes a broadening interest in long ag commodities as the US weather market ends.

Russia raised their wheat export tax to $39.4/MT based on a 60-day rolling average price of $256.40. This compares to the August 25-31 tax of $31.7/MT.  It’s forecast that Russian export tax rates will continue to rise amid rising world wheat/corn values. Based on Russian fob values above $300/MT, its likely that the export tax will reach $75/MT at some point later this year.

FAS/USDA is expected to announce that China was a soybean buyer yesterday on the sliding CBT. ARC is told that additional demand occurred on the overnight weakness. China is ramping up its soybean purchase program for October and November with crushers extremely short bought. And China’s Central Bank signaled overnight easier lending terms which should boost China’s coming GDP.

The Argentine BAGE held their winter wheat crop estimate at 19.0 MMTs. So far, the dry August weather has not been enough to cut their wheat crop production estimate. Some needed rain is slated to drop in early September.

 Malaysian November palmoil futures closed 59 ringgits lower at 4,333 RM/MT.  Paris December wheat is down €.25 at €247.25/MT. Dalian Sept corn lost $.05 to $10.15/Bu while September soymeal fell $2.00/MT to $558.15.

ARC looks for US corn and soybean crop condition ratings to hold steady or decline 1% in the GD/EX category on Monday. The rain across the W Midwest will stabilize crops but falls in conditions are reported across the E Midwest, and in particular Indiana amid a mostly hot/dry week.

Seasonal bottoms are a process. Ahead of the start of harvest its unlikely that a strong rally will unfold until a disappointing yield trend can be confirmed. Likewise, CBT breaks will uncover strong end user pricing amid US corn/soybeans being the cheapest in the world. For now, trade the range.

North American Weather Pattern Discussion: The primary US weather models agree on the 5-7 day forecast, but there are differences thereafter.  

A strong hurricane (Ida) is expected to strike Louisiana late Sunday or early Monday. The forecast models are in synch in bringing Ida onshore with wind gusts exceeding 100 MPH and flooding rain being an immediate concern for unharvested Gulf State crops. The good news is that models quickly weaken Ida with diminished rain for the Tennessee Valley and the Carolina’s. As a note, there is another tropical system brewing in the Atlantic Basin that NWS offers a 70% chance of developing. The tropical storm season is ramping up with a peak due in early October.

The best rains of the growing season are noted across S Minnesota/Iowa overnight with totals of .5-3.00”. Some gusty wind downed corn. The attached 10-day rainfall forecast is from the EU model. A series of storm systems will ride a southward sliding jet stream across the Canadian Prairies, North Dakota, Minnesota, and Wisconsin into early next week. Additional rainfall will range from 1-3.00” and some of that moisture leaks into N Illinois and N Indiana on Monday. Otherwise, a drier flow will persist across the east.

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