- The US Vegetation Health Index (VHI) reflects the heady crop conditions that exist across the southern half of the US, and the growing concern for crop/yields across the Plains and NW Midwest. The VHI reflects that the dire N Plains drought is moving south and east. Traders will closely be following whether that progression continues during August. The need for rain is immediate across IA, NE, SW MN and the Dakotas. Yield damage in the Dakotas is irreparable at this juncture. It is IA, MO and KS that cannot further slip on soil moisture in the next few weeks.
- Friday was a quieter trading day that left soybean prices 4-5 cents lower, but still up more than 20 cents for the week. Meal finished slightly weaker, while December soybean yoil marked the 2nd consecutive close over the contract’s 200 day moving average. Based on where rains fell and the week’s heat, we would expect that crop ratings on Monday will be 1-2% lower. Field visits reflect extremely small sized soybean plants in IN, IL, MO and IA. It all comes down to Mother Nature for the direction of the market. Soybeans are in their reproductive phase and the impact of weather on yield enlarges.
- We have discussed how the W Corn Belt is now “ground zero” for US corn yield changes, and overnight precipitation was a bit more widespread across C IA than expected. Additional precipitation will linger across; N IA, MN, WI and N IL in the next 24 hours, but a major N American weather pattern shift is not indicated. Model updates today in fact features additional bouts of heat across the Western Corn Belt, along with weekend temperature in the 90s/low 100s across the Plains, into the first week of August, as a high pressure ridge hangs on barring a Gulf tropical storm. It is understandable that the market adds and subtracts premium based on very near term weather, but our point is that national US corn yield potential is now lower relative to 165-167 bu/acre estimates. Expect volatility through the remainder of the growing season, but so far we are disappointed in yield estimates from even the E Corn Belt. Short term downside risk appears limited to $3.85 December with the upside pegged at $4.20-4.40 into mid August.
- Overnight rain across pockets of the W Corn Belt triggered profit taking/new selling in US grain futures, and wheat was not immune. Harvest in Europe and the Black Sea is ongoing, and we would mention that yields reported in Ukraine have improved. Otherwise, world cash markets ending the week are little changed, mostly due to even newer highs in the €uro. Wheat will most likely follow Chicago corn into early autumn, though world cash markets tend to find their seasonal lows in the first half August. The trend thereafter is for a slow but steady rally into November/December. Interior Russian wheat markets are steady/higher on the week. Cash prices in the Volga region are sharply higher, likely due to slowed harvest progress. Too much rain (3-4.00”) will fall across Germany and Poland over the next 7 days, and Central Russia will stay in a rather wet pattern through the next several weeks.