Midday GFS Drier Nearby and Extended Range; CBOT Waits for NASS Crop Ratings

Aug 7, 12:16 pm | Mid-day Commentary | Share this:

** CBOT grain futures have traded mostly firmer in moderate volume as traders take eye on the USDA Crop Report on Thursday. The initial rally has been tentative in moderate volume as traders discuss the potential for an increase in US corn and soybean crop ratings this afternoon.

 ** The whisper number for US soybean condition ratings is up 1-2% in the GD/EX category while corn is steady to up 1%. The bears are hopeful that a NASS US ratings increase produces some pressure for them to take profits on net shorts on Tuesday. ARC looks for conditions to be unchanged to down 1% in each corn and soybeans as the Iowa crop hit a wall in terms of short soil moisture. Producers report that IA corn is tipping and that soybeans look good from the roadway, but just aren’t growing and producing a canopy. Iowa’s need for rain is immediate and although cool temps are helping, the soil moisture shortage is causing a more rapid maturation rate.

 ** US weekly export inspections for the week ending August 3rd were; 38.4 Mil Bu of corn, 25.2 Mil Bu of soybeans, and 21.5 Mil Bu of wheat. For their respective crop years to date, the US has shipped out 2,114 Mil Bu of corn (up 475 Mil Bu or 29%) and 2,035 Mil Bu of soybeans (up 267 Mil Bu or 17%).  

** ARC research argues strongly that WASDE should raise US 2016/17 corn export estimates by 25 Mil Bu to 2,550 Mil Bu and US 2016/17 US soybean exports by 35-50 Mil Bu to 2,135-2,150 Mil Bu. The US has to average 25 Mil Bu/week for the next 3 weeks for the US to export 2,150 Mil Bu annually.

** US wheat exports for the crop year to date are 206 Mil Bu or up 30 Mil Bu from last year’s pace. The early US wheat export pace has been surprisingly good, and it’s expected to persist due to smaller Australian, Canadian, Ukraine and Brazilian crops. ARC argues that US wheat exports will continue to surprise on the upside due to the hunt for protein quality wheat. Note that world wheat prices are steady to firm to start the week and have been slow to follow the US futures decline.

 ** Russia is harvesting a record large wheat crop of 74-75 MMTs! But, Russia’s problem is not the size of their harvest, but that the logistics will prevent them from exporting more than 28-30 MMTs of wheat – similar to last year. So, the world will find that 40 MMTs of reduced world exporter wheat supplies will translate into steady to better US wheat export demand. Our advice to traders is not to become bearish of Russian wheat based on their crop size since investment in the interior and export logistics has not been made. 

** Midday GFS Weather Model Update: The forecast is drier for the entire Central US for the next 10 days – with the 11-15 day extended range also holding onto the same pattern and being drier. As suggested this AM, there is a strong blocking Ridge of high pressure across Canada with a Trough across the Central US that is displaced to the south. This pattern is called a “Rex Block” and often has stability in late summer. Notice in the attached rainfall graphic that limited rainfall for the Canadian Prairies southeast into the lower Ohio Valley. Heavy rains are slated to drop from Colorado into a southward arc into the Carolinas. To the north of this static front, limited rains are expected with near to below normal temps. This pattern could linger into late August, leaving the “fat portions” of the Midwest with limited rains into Aug 21st – a concern! 

 ** AgResource Market Comment: The reports from the field show huge yield variability in corn and historically short soybean plants. The midday weather foreacst is too dry for the heart of the Midwest. Iowa crops are hitting a wall in terms of soil moisture and the need for rain is now immediate. Soybeans are just too cheap relative to their fundamentals and declining stocks. The grains will follow soybeans.

** CBOT brokers estimate that funds have bought 3,200 contracts of corn, 2,800 contracts of soybeans while being on both sides of the wheat market. In soy products, funds have sold 3,100 contracts of soyoil and bought 2,700 soymeal.

** GFS 10 Day Rainfall Forecast into August 17th