A collapse in oil prices overnight put downward pressure on bio-fuel crops.
Grain futures for the third week in a row opened firm overnight and succumb to outside selling. Rain totals for the Midwest were mixed, as typical spotty rather than widespread rain showers occurred. Areas of Minnesota and Iowa received needed rains, while the other half received minimal or no precipitation. The decline in grain price overnight was tied to the collapse in oil prices which declined another $3.00 as a UN panel offered a dire warning on Climate Change, saying its “Code Red” for humanity. This put pressure on biofuels, while wheat tried to maintain strength on reported further Russian wheat cuts.
Energy prices declined precipitously overnight, with UN scientists indicated that limiting global warming to 2 degrees Celsius above pre-industrial levels is beyond the world’s reach without immediate, rapid and large-scale reductions in world greenhouse gas emissions. Above 2 degrees Celsius warming is considered the critical tolerance threshold for world agriculture and human health. Today’s UN report sets the stage for new climate talks slated for November. Biofuels are a low carbon solution and a steppingstone to electrification. The question is, how long will this talk affect the reality that demand can still only be satisfied in energy with oil and biofuels unless the world wants to walk. Electrification for cars as a fleet is a difficult task (lack of electrical grid to support it) even if forced there by taxes near-term. Oil can work lower yet on opinions and bias over this, but ultimately demand will not stray away from oil in the coming years.
Further downgrades of Black Sea wheat estimates occurred again for the 2021 Russian wheat crop, as you’ll date is now pointing to a crop size of 74-76 MMTs. Spring wheat yields are not rebounding like they did last year. The weak yield data has the Russian wheat crop down 9-11 MMTs from the WASDE estimate of July. A 4-5 MMTs cut in 21/22 Russian wheat exports to follow. Since late June, Russian fob wheat has rallied $40-45/MT and is offered above $272/MT ($7.40/Bu). A deepening drought is also producing a sharp fall in the ‘21 Russian corn/sunflower crops. Russian feed prices are at record August highs.
This afternoon the NASS Weekly corn and soybean crop conditions are anticipated to decline 1-2% due to recent heat/dryness. The condition falls are focused on the E Midwest where several weeks of dry weather has trimmed yield potential. Rapidly declining soil moisture for Midwest crops with high water demands will cause US corn/soybean condition ratings to decline in the next 2 weeks.
Weekend rainfall was disappointing on a coverage basis with some pockets of heavier rain, but large swaths of the W Midwest and the Plains received less than .40”. This will produce crop stress over the next 10 days due to warming temperatures and limited rain west of the Mississippi River. Rain chances will continue for another 36 hours across the E Midwest before a broadening Western US Ridge shoves the jet stream northward with a Trough deepening across Hudson’s Bay. The resulting Ridge/Trough pattern produces an NW upper airflow maintaining a below normal rainfall pattern for the Plains and the W Midwest. E Midwest rainfall is estimated in a range of .25-1.25” with an estimated 55-60% of the area seeing less than .50” of rain.
Last week’s cash cattle trade was higher, with cattle in the South selling for $121-122 or $1-2 higher for the week. Cattle in the north sold $3 higher at midweek at $125, while some late-week sales were quoted as high as $127. The early outlook this week is steady to $2 higher. Boxed beef values rallied to five-week highs. The choice-value was $17.80 higher for the week to $296.26, led by a near $46 rally in the rib value. The select value gained $17.90 to $277.09. Both values were at record prices for early August.