Morning Commentary 8/9/21

UN Climate Report Crashes Energy-Which Hits BioFuel Crops of Corn/Soyoil;Russian Crops Under Weather Stress;USDA Estimates Seem Modest

6:30 CT CBT Prices: Nov soybeans are down 2.50 cents at $13.3425, Dec corn is down 4.00 cents at $5.525 with Sept Chi wheat down 5.50 cents a $7.135.

AgResource Morning Grain/Soy Comment & AnalysisGood Morning! CBT futures are slightly lower in moderate volume. Crude oil futures under acute pressure which appears to be leaning on the US biofuel crops of corn/soyoil. September crude oil is down nearly $3.00/barrel as it retests its July low at $65.00.

The fall in world energy values occurred as a UN panel offering a dire warning on Climate Change saying its “Code Red” for humanity. The UN Panel of scientists indicated that limiting global warning to 2 degrees Celsius above preindustrial levels is beyond the world’s reach without immediate, rapid and large-scale reductions in world greenhouse gas emissions. Above 2 degrees Celsius warming is considered the critical tolerance threshold for world agriculture and human health.

Today’s UN report sets the stage for new climate talks slated for November. Biofuels are a low carbon solution and a steppingstone to electrification. The weakness in crude oil should not be seen as bearish to world biofuel crops.

Black Sea private estimates of the 2021 Russian wheat crop continue to decline with recent yield data pointing to a final crop of just 74-76 MMTs. Spring wheat yields are not rebounding like they did last year.

The weak yield data has the Russian wheat crop down 9-11 MMTs from the WASDE estimate of July. A 4-5 MMTs cut in 21/22 Russian wheat exports to follow. Russian fob wheat has rallied $40-45/MT since late June and is offered above $272/MT ($7.40/Bu). A deepening drought is also producing a sharp fall in the ‘21 Russian corn/sunflower crops. Russian feed prices are record August highs.

USDA/FAS is expected to announce new US soybean sales to China following sales last Friday of 6-10 cargoes from the Gulf/PNW. China has returned as US soybean buyer as Brazilian soybean prices have rallied sharply on tightening domestic supplies. The difficulty that exporters/crushers are having securing Brazilian soybeans has some wondering if the 2021 harvest was overstated? 

AgResource forecasts that NASS Weekly corn and soybean crop conditions will decline 1-2% due to recent heat/dryness. The condition falls are focused on the E Midwest where several weeks of dry weather has trimmed yield potential.

September Malaysian palmoil futures fell 75 ringgits to 4,345 RM/MT on sliding world energy prices. Paris Sept wheat futures are down €1.25/MT at €228.25. China’s Dalian Sept corn fell $.04 to $10.21/Bu while Dalian Sept meal rallied $3.60/MT to $552.60/MT. China’s cash meal trade remains robust.

The average US NASS estimates for the 2021 US corn/soybean yields are 177.6 and 50.4 BPA, respectfully. 2021/22 US corn end stocks are forecast at 1,297 Mil Bu, soybeans at 159 Mil Bu and US All wheat at 644 Mil Bu. In July, WASDE forecast US corn stocks at 1,432 Mil Bu, soybeans at 155 Mil Bu and wheat at 665 Mil Bu. Analysts forecast that 21/22 US corn stocks will drop 135 Mil Bu, wheat 11 Mil Bu while soybeans rise 4 Mil Bu. Amid a sharp fall in 2021 world wheat/corn and canola production, the US stocks cuts appear to be modest!

North American Weather Pattern Discussion: Weekend rainfall was disappointing on a coverage basis with some pockets of heavier rain, but large swaths of the W Midwest and the Plains received less than .40”. This will produce crop stress over the next 10 days due to warming temperatures and limited rain west of the Mississippi River. Rain chances will continue for another 36 hours across the E Midwest before a broadening Western US Ridge shoves the jet stream northward with a Trough deepening across Hudson’s Bay. The resulting Ridge/Trough pattern produces a NW upper air flow maintaining a below normal rainfall pattern for the Plains and the W Midwest. E Midwest rainfall is estimated in a range of .25-1.25” with an estimated 55-60% of the area seeing less than .50” of rain.

Rapidly declining soil moisture as the US crops have high water demands will cause US corn/soybean condition ratings to decline in the next 2 weeks.

The 10-day rainfall forecast graphic is from the GFS US weather model. The best rains will be focused on the SE US with some of the Florida rains due to a tropical storm.

Central US temperatures will be hot this week with highs across the Plains/W Midwest ranging from the upper 80’s to the lower 100’s. Slightly cooler readings (still above normal) return on the weekend and next week.

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