** The morning has been much slower in Chicago with corn, soybeans and wheat adding back weather premium as the forecast models flipped to warmer/drier over the next 10-14 days. Shorts remembering the last few Sunday evening’s (sharply higher) are covering with only modest fund demand noted. The charts turned down in Thursday’s collapse and fund managers are loath to return to the “buy side” until there is some healing of the technical considerations. AgResource looks for a stronger close and for traders to pay keen attention to the EU model that will be just starting before the 1:15 PM CDT close.
** Canadian ‘17 crop estimates are in decline based on 3-5 weeks of warm/dry weather. For crop areas that had adequate or surplus soil moisture heading into mid June, crops have continued to perform favorably. Where soil moisture was short in late June and early July, crop stress has been building, just like across the border in North Dakota and Montana.
** Private sources are lowering their all Canadian wheat crop estimates based on the wide variability in crop conditions amid ongoing dry/warm weather. Most are pegging the ‘17 All Canadian wheat crop estimate at 24-25 MMTs, down from the WASDE forecast of 28.35 MMTs & a Canadian canola estimate of 18-18.6 MMTs.
** USDA is pegging 2017 Canadian canola production at 21 MMTs and unfortunately, the weather forecast for the next few weeks maintains a rather arid outlook with warming temps. Rains will be demanded by the last week of July or a further decline in canola yield/production lies in the offing. In particular, the Canadian canola outlook is outright bullish with their being no room for any crop decline amid tight stocks and rising Chinese demand.
** Longer term, ARC clients should remember that there will be a “market pull” to entice North American farmers to plant more canola, lentils and spring and durum wheat in 2018. In the US/Canada, this will reduce acres that are being planted to more traditional crops like corn and soybeans. With North Dakota planting an extra 1.2 Mil acres of soybeans in 2017, it’s not hard to envision that US soybean seeding could fall 2-4 Mil acres next year. This is a big deal with US corn seeding also likely to rise 1-2 Mil acres in 2018.
** CBOT brokers estimate that funds have bought 8,000 contracts of corn and 6,000 contracts of soybeans, while being flat in wheat. In soy products, funds have bought 4,000 contracts of soymeal and 1,000 contracts of soyoil.
** FAS announced the purchase of 1.3 MMTs of US soybeans by China under framed contracts. The news/signings produced no market impact as everyone knows that without a price and a date for shipment, the contracts are nothing more than a handshake and a promise. Since China is expected to take more than 30 MMTs of US soybeans in 2017/18, they just won’t have any market impact.
** Midday GFS Weather Model Update: The forecast is similar to the overnight run in its long wave features as a Ridge of High Pressure produces hot/mostly dry weather across the South Central US next week. “Ring of fire” rains will occur as the jet stream dips into the Lake States including; MN, WI, NE IA and N IL and IN/OH. Unfortunately, the model reduced rain totals for the Plains with just a few spits of moisture for the Dakotas. This will worsen their deepening drought. The mean positon of a high pressure Ridge holds across the Plains and the SW Midwest with extreme heat from KS into S IN. The Ridge holds in this basic position into Sunday July 23rd before weakening/retrograding back west. Such weakening is normal, but we note that there is nothing to alter the overall US pattern such a tropical storm until at least the opening days of August. On the 11-15 day some needed rain falls across the N Plains, but our confidence in this moisture is low.
** AgResource Market Comment: Weather patterns often trend! And we see no reason why the N Plains drought won’t continue to shift south and east into August. US corn/soy/spring wheat yield is edging lower with crop conditions to hold steady or decline 1% on Monday. This is no place to make new sales and we remain steadfast with an expectation that 2017 US corn, soybean and spring wheat yields will be below trend.
