Grain futures collapse on hint of long-term weather model change.
A sharp reversal of attitudes in the grain market created a collapse in pricing overnight. The market focused on a cooler and slightly wetter 9-14 day forecast versus the oncoming warm, dry pattern for this week. Whether interaction with a potential tropical system in the US Gulf builds validity, there is still low confidence that it will bring about a significant trend shift. This afternoon's US crop ratings will decline from the past week's continued hot/arid trend, with stress being placed on Iowa, Minnesota, South Dakota, Wisconsin and Michigan crops this week with temps in the 90s and limited rainfall.
Opinions vary widely, and confidence in the extended range forecast is low and more time is needed to assess rainfall amounts/locations. Temperatures will cool to more seasonal levels following a hot weekend, but the question is, will a pattern change take place? The pattern change is being argued as a long term change or a temporary interlude produced by the potential Gulf tropical storm. One thing that is no one is the vast dry soils across the Western US, and this being only mid-June will return the heat/dryness to the Plains, and at least the W Midwest in coming weeks. There is no indication that a cool/wet Central US weather pattern is ready to be established. Corn and soybean crops will continue to struggle this week with the deepening dryness, on the hopes for rain on the weekend and early next week that need to be proven valid, or the present break will be reversed.
This afternoon's crop condition rating reports expect declines in corn and soybean good/excellent ratings by 2-4%. Producers in Iowa/Minnesota/South Dakota report corn rolling amid dry soils and extreme heat. Soil moisture is so short that regular weekly rainfall and a return to seasonal temps are needed immediately. The top end of 2021 US corn/soybean yields has already been lost.
The 3 major forecasting models agree that hot/dry weather will persist across the W & C US this week, with a few showers noted for the W Midwest this weekend. The forecasts do not agree on an extended range solution, adding to this week's CBT market volatility. The major weather models offer limited rain for the N Plains and the W & C Midwest over the next 5-7 days, with a chance of improved rain/cooler temperatures starting on the weekend and continuing next week across the Midwest. The forecast models differ in rainfall amounts and their locations, with the Canadian model offering an arid 10-day forecast, while the GFS/European models have some rain on days 7-10. None of the forecasts offer rainfall for everyone. The coming rain is an interaction between a tropical storm in the Gulf of Mexico that draws cooler air southward and a fetch of upper air humidity. The best chance for rain is on the weekend and next week.
Cattle futures closed higher last Friday with a higher start expected, especially for feeder cattle on the collapse in feed values. Cash cattle trade last week was steady at $119-120. This marks the 10th consecutive week that the cash market was within $1-2 of $120. A strong directional move is building, and seasonal trends suggest a move lower. The CME is indicating a steady/higher trend through the summer. Boxed beef values were lower last week, likely confirming that a summer top is in place. The choice-value was $1.42 lower, and select was down $6.52.