- HEADLINES: Chicago stays weak but rebounds from morning lows; GFS weather forecast trends in drier in Central Midwest at midday.
- Chicago futures are sharply lower at midday, but they have recovered some of their early losses on end user pricing and short covering. The expectation that US corn/soybean crop condition ratings will fall 3-5% and spring wheat 1-2% in the good/excellent category this afternoon has offered support. Today’s fall in ratings heightens the importance of coming rainfall this weekend and early next week. The coming rains are a “big deal” for US corn and soybean yield potential.
- We would argue that the top end of 2021 corn/soy/spring wheat yields have been curtailed by the hot/dry late spring. The market will be extremely sensitive in the location/amount rainfall this weekend. Key will be whether Iowa and the surrounding drought areas receive the needed relief.
- Iowa’s soil moisture as measured by the US Drought monitor is at its lowest point looking backwards to 2000. With Iowa the US’s first or second producer of corn/soybeans, rain/cooler temperatures will be of the upmost importance. The marketplace will use crop condition ratings, weather and yield modelling and satellites crop health measurements to gauge yield. By late week, a 2021 US corn yield of 174-176 bushels/acre will likely become popular with private analyst estimates.
- Chicago brokers estimate that funds have sold over 22,000 contracts of corn, 13,000 contracts of soybeans, and 5,500-6,000 contracts of wheat. In the soy products, funds have sold 5,500 contracts of soyoil and 4,900 contracts of soymeal.
- US weekly export inspections for the week ending June 10 were 60.8 million bu of corn, 4.7 million bu of soybeans, and 17.6 million bu of wheat. For their respective crop years to date, the US has shipped out 2,124 million bu of corn (remember that Census US corn exports are running ahead of FGIS by 153 million bu for a total of 2,277 million bu), 2,087 million bu of US soybeans (Census ahead by 124 million bu for a grand total of 2,211 million bu), and 24.7 million bu of wheat (down 5 million or 21% for the second week of the new crop year). China shipped out 21.5 million bu of US corn last week as their shipping total now exceeds 620 million bu. China has another 290 million bu of corn that looks to be exported by the end of the crop year in late August. This works out to exporting a little more than 25 million bu of US corn per week. We maintain a US 2020/21 US corn export estimate of 3,050 million bu, another 175 million bu larger than the USDA’s latest estimate.
- Some are pessimistic that the Biden Administration will alter or change their existing biofuel rules. This offers a low probability of their enacting biofuel refinery waivers, which Biden campaigned against prior to the election. Several key US farm congressional leaders have sent Biden letters urging that there be no change. Like the Obama Administration, we expect that EPA will hear out refiners, but change existing proposals.
- The midday GFS is much drier next week than the overnight run across the Plains and Central Midwest as the looming tropical system turns abruptly eastward into the Southeast on Sun/Mon. Moisture available for the remainder of the Central US will be scant, leaving rainfall across the Plains and Midwest over the next 10 days limited to regional event. Totals of 1.00″ or better next Tues-Fri will be rather scattered in nature. We also mention max high temperatures this week will reach into the 90s and low 100s, with much of the Western Plains to labour under max temperatures of 102-105.
- Precipitation details next week hinge upon the path of this tropical storm, and clarity won’t be available until next week. Widespread soil moisture loss persists over the next 5-6 days. Whether it continues thereafter is key to market direction.
- Today’s break shows clearly the market’s sensitivity to even modest changes in the Central US climate pattern. Our concern over drought expansion/intensification remains elevated. Next week’s projected precipitation MUST fall as indicated to prevent the trimming of soy/corn yield potential. We advise against chasing this break.