Sharply higher weather market overnight.
There was a sharply higher grain market overnight on concerns over heat and dryness in the Plains and now the western and northern Midwest into June 20. Extreme heat was noted on the weekend across the Dakotas, with high temps ranging from the mid 90's to the lower 100's. Record daily highs of 102-108 degrees were recorded in N Dakota on Friday and Saturday. Limited soil moisture helps fuel the extremely hot temperatures. A few North Dakota storms developed late Saturday, but the moisture was insufficient to counter evaporative losses. Otherwise, net drying occurred across most of the Plains and the W and N Midwest. The morning GFS puts moisture into North Dakota while it dries out in Iowa. This is why Minneapolis wheat drifted from its night session higher valuations while the other grains firmed into the morning close.
The USDA/WASDE will be releasing their June Crop Report on Thursday. It is expected that WASDE will further reduce their Brazilian corn crop estimate and raise US 2020/21 and 2021/22 corn exports due to the smaller South American harvest. WASDE should also raise 2020/21 and 2021/22 US corn grind for ethanol demand forecasts by 50-75 Mil Bu as Americans return to normal driving habits. The US's exceptionally limited old crop corn/soy stocks position only amplifies the importance of US new crop summer row crop yield amid record large Chinese corn imports.
Index funds start their 5-day roll period today with July contracts pushed forward to September or new crop futures. Following the roll, the market will pay close attention to June/July cash basis premiums heading into 1st notice day against July futures. Record large cash premiums are being paid for old crop corn/soybeans should underpin July futures into 1st notice day.
This morning's GFS operational model offers the chance for rain across North Dakota. The European model is farther north with the rain chances keeping the moisture across Southern Canada. Again forecasters think the GFS is too wet and too far south with rainfall for North Dakota. There will be showers across the Canadian Prairies, but only limited rainfall will reach North Dakota and far Northern Minnesota. This implies a deepening drought from the North Central US into June 20. Iowa, Nebraska, the Dakotas, Minnesota, and Wisconsin will hold an arid pattern for the next 2 weeks. It will be crucial for crop yields that rain returns in the last 10 days of June. The best Central US rain chances occur across the Delta and S Midwest where crops .75-2.00″ of rain will fall. Heat will be a feature for the N Plains and the NW Midwest in the next 10 days. A high-pressure Ridge will maintain mid-80's to mid-90's for daily high temps.
Last week's cash cattle trade was mostly steady at $119-120 across the Plains cattle markets, and a steady outlook is offered for this week. The combination of the holiday-shortened work week and reduced JBS capacity put the week's slaughter at 538,000 head. The lighter production rate and cooler restocking following the holiday weekend kept the beef rally intact. The choice cutout value was up $8.01 for the week, and the select value gained $10.83. Estimated slaughter margins reached a new high for the year of $737/head.