- HEADLINES: Chicago trades both sides of unchanged in corrective session; GFS weather forecast at midday drier in the 6–10-day period; Rain needed immediately.
- Chicago futures are mixed at midday with the bears out in abundance with this being the anniversary of the start of the 2022 summer grain break. A year ago today, Chicago futures fell to sharp losses as the Central US weather pattern improved and world Central Banks became aggressive in raising interest rates to slow inflation. 2022 Chicago grain futures dropped to sharp losses into mid-July as December 2022 corn futures lost more than $2.00/bu while November 2022 soybeans fell nearly $3.00/bu. Seasonally, price tops are set in May/June and traders are on edge due to cheap Brazilian corn/soybean fob offers that the same could occur this year. Amid the big volume of Chicago last Friday and near record volume in grain options trade, the daily/hourly price volatility is rising.
- Today, the war against inflation is being won by Central Banks, but Mother Nature is holding the upper hand on US corn/soybean yields following months of dryness. June appears that it will end as dry as May with El Niño not having much influence on US or world weather. So far, 2023 weather has been about pattern stagnation produced by the warming of the Arctic (and Antarctic) that has slowed the jet stream and produced amplified weather patterns.
- Like Argentina from January through March, the prospect of rain was held in the extended range forecast, but it was never pulled forward into the 1-5 day period. This was due to pattern stagnation that is not being handled very well by the forecast models. Remember in the extended range that the models shift back to normality if the pattern is amplified/slow in its progression. With the Bermuda high pressure cell absent, we worry about a like type of forecast development for the Central rain with ghost rain in the extended range that never happen.
- The USDA/FGIS weekly grain export inspection report has been delayed due to technical difficulties.
- Midwest farmers are becoming increasingly concerned about their crops and the ongoing lack of soil moisture. Thankfully, temperatures have not been hot like 2012, but questions abound as to US corn/soybean yield potential amid one of the driest mid-May to late June’s on record for the Eastern half of IA, IL, MN, WI, MI, and IN. Corn in these states should be much taller while soybean stands are poor due to poor germination/emergence. The need for rain is immediate and for another 2 weeks, it appears that US yield/production estimates will continue to decline. This raises the importance of July weather to preserve a 177 bushels/acre corn or a 51 bushels/acre soybean yield.
- Russian fob wheat prices have started to recover as worry over the 2023 crop emerges while some cite Indian interest for Russian wheat as being bullish. Russian wheat traders lament that India has been checking Russian fob wheat prices for nearly a week. Whether India is trying to better understand world wheat values, or they are preparing for a purchase is unknown. It is something to watch close in the days/weeks ahead.
- The midday GFS weather forecast is like the overnight solution with limited rainfall for IA, IL, MO, S MN, WI, MI, and the northern half of IN. Extreme heat develops at the end of the month with highs returning to the mid 80’s to the lower 100’s. The heat/dryness will combine to add additional stress on US corn/soybean crops. The Northern Plains will benefit from the coming 0.5-2.50” of rain but note that the heaviest rain has been shifted north into N Dakota. This remains a concerning Central US weather pattern with limited rain for the high yielding Midwest.
- Periodic profit-taking corrections keep volatility in place, but until there are at least hints of a US pattern change with better rain for the Midwest, we doubt bearish trends can be sustained. US corn/soybean crop ratings should drop today and next week based on the forecast. Old crop corn/soybeans are in strong hands with the farmer sold out. Bull spreads and flat price action makes today look much like a needed correction. Prices ran fast and hard late last week, Chicago needed a correction, but until there is a strong hint of a North American weather pattern change, we remain bullish on diminished supplies.