8/6/21

Morning Commentary 8/6/2021

CBT Rises on US/China Trade Hope; Central US Weather Drier for Iowa/Illinois and Entire Plains with Continued Heat; US Yield Potential Sliding?

6:30 CT CBT Prices: Nov soybeans are up 6.50 cents at $13.345, Dec corn is down 2.00 cents at $5.51 with Sept Chi wheat up 4.25 cents a $7.17.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! Mostly higher is CBT trade this morning due to a rally in soybeans/wheat. N Plains and W Midwest rainfall totals in the past few days have been disappointing. And there is a push by the US business community to prod the Biden Administration to engage with China on bilateral trade and the continuance of the Phase 1 Trade Deal. China soymeal trade was active (again) this week with inquires for US soybeans rising to US exporters.

US Producer sources report that Northern and Central Plains corn/soybean crops have hit a moisture wall and are maturing rapidly due to the past 3 weeks of heat/dryness. And Indiana/Ohio Midwest farmers indicate that the dryness has taken the top off their yield potential as corn ears tip and soybean leaves wilt in the afternoon heating. ARC expects declining US corn and soybean crop condition ratings on Monday. This is not the finish that US farmers were hoping for out of the 2021 growing season. ARC expects that based on the weather to date during August and the forecast, traders will be subtracting yield from the NASS August crop estimate.

Nearly 3 dozen of the US’s most influential business groups are prodding the Biden Administration to restart trade negotiations with China.  The restart is long overdue as USTR is said to be completing a review of US/China trade policy. China has shown a willingness to engage in new trade discussions as a way more deeply engage with the Biden Administration politically. The ag markets await the response of the Biden Administration to the trade push from business leadership, but the hope is that for a reduction of US tariffs on Chinese goods and an 2-3 year extension of the Phase 1 Deal.

AgResource has been reporting in recent days that Chinese cash meal trade has been robust with crush margins back to breakeven. China will take at least 35 MMTs of US soybeans in the 2021/22 crop year, but the pricing of those purchases will not be easy in CBT futures due to declining volume and open interest. China needs to secure an average of 2 MMTs of soybeans weekly to reach an annual 2021/22 import total of 104 MMTs

No solution is on the offing in Argentina at Bahia Blanca - the downriver terminal that tops off vessels before departing across the Atlantic. An estimated 28 vessels and over 11,000 trucks are now waiting for grain. The pressure on the Argentine Gov’t is quickly building as costs rise.

September Malaysian palmoil futures rallied rallied 23 ringgits to 4,420 RM/MT. Paris Sept wheat futures are up €1.75/MT at €226.75. China’s Dalian Sept corn fell $.03 to $10.25/Bu while Dalian Sept meal was steady at $549/MT.

The decline in Non-US grain production from the initial May WASDE report will be record large as of September amid the drop of Black Sea wheat/corn,  Canadian wheat/canola and other grains, US spring wheat, and Brazilian corn supplies. The looming world grain shortfall pushes world feed/soy demand to the US. A demand led bull looms for the CBT following the August WASDE report.

North American Weather Pattern Discussion: The forecast models agree, a below normal rainfall and above normal temperature pattern will grip the Plains and W Midwest for another 10-12 days. And rainfall totals in recent days have not added up to the amounts advertised by either the GFS/European models as large swaths of the Central US are extremely dry. This dryness will produce another 1-2% decline in GD/EX corn and soybean ratings on Monday.

The attached 10-day rainfall graphic is from the EU model. The best chance of rain is over the next 3 days before a lengthy period of dry weather returns. Scattered showers will pass thru the Lake States for another 3 days. The models have pulled the best rain chances north into E Minnesota, Wisconsin and N Illinois.

Iowa/N Illinois has a good chance of rain on Sunday. The weekend rains will continue to be widely scattered in nature with daily totals ranging from .1-.8”. This leaves 60-65% of the Central US as dry. In particular, the Plains will be arid and crops here are reported to be maturing quickly amid the acute heat/dryness.

Above to much above normal temperatures will prevail with highs ranging from the upper 80’s to the lower 100’s in the Plains and W Midwest with 80s/90’s to the east.

10 Day Rainfall Forecast Leaves 60-65% of the Central US Arid:

Heavy Rain Potential Shifts North to Wisconsin and E Minnesota:

1o Day Rainfall Trend is Dry Outside of Wisconsin and N Illinois:

Extreme Heat - Same Areas  where it has been Located All Summer:

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