Grains closed sharply lower on Tuesday:
Sept Corn – 40 cents/bu (5.52)
Dec Corn – 40 cents/bu (5.39 ¾ )
Nov Soybeans – 94 cents/bu (13.05)
Sept Chi Wheat – 26 ¾ cents/bu (6.26)
Cdn $ -0.00770 (80.24 cents)
WTI Crude Oil -1.79/barrel (73.37)
Grain futures were under pressure from the opening bell this morning, as a wetter US Midwest forecast for this week, particularly for parched areas of the Dakotas and Minnesota, brought waves of selling to the market today. The fact that the CBOT had been closed since 2:20 pm on Friday (over 90 hours since the last trade) had early morning calls for the market to be 20 cents/bu lower on corn and 25 cents/bu lower on soybeans, based on actual weekend rains and the wetter forecast. We easily eclipsed those projections, and subsequently saw algorithmic computer trading accelerate the move to the downside. Corn was locked limit down early in the session, with over 200,000 contracts (1 billion bushels) of September and December corn futures offered for sale at limit down. At the time, with corn options trade, the corn market was trading 10 to 12 cents/bu below limit down. However, shortly after 1 pm ET, we started to see a large volume of December corn futures trade at 40 cents/bu lower, and the volume of corn offered shrank to just around 10,000 contracts (50 million bushels). We still closed limit down on the day for corn, but the close gives hope that tomorrow’s trade might be a two sided affair. Midday weather maps shifted their extended forecasts to a little wetter for the eastern Corn Belt and a little drier for the Western Belt, which encouraged some of the late trade.
Over the 72 hour US Independence Day long weekend, a weather system dropped ½ inch to an inch of rain across all of North and South Dakota. Furthermore, another couple rounds of rains are expected for the Western Corn Belt and Upper Plains on Tuesday and again on Friday/Saturday of this week. The rains forecast vary widely, depending on the model being used, but since the market has rallied largely on dryness in the western Midwest, actual precipitation in that area is going to be negative for the market. The trade largely ignored the fact that long range weather forecasts call for warming and drying conditions across the Midwest after this week.
This morning’s USDA Weekly Export Inspection Report did nothing to offset the negative short term weather forecasts, as actual exports from the USA for the week ended July 1st were disappointing for corn, beans, and wheat. The drop in the export pace of grains is starting to bring into question whether the USA will hit the government’s export targets for 2020/21. That is a stark difference to many analyst projections for even tighter old crop corn stocks in next week’s USDA July Supply and Demand Report.
The USDA released it’s Weekly Crop Condition Report after the close of trading this afternoon. The good/excellent ratings for corn remained unchanged from last week @ 64%, while the good/excellent ratings for soybeans fell 1% to 59%. Winter wheat conditions fell 1% to 47% good/excellent, while the spring wheat ratings fell another 3% to an all time record low for this time of year of 16% good/excellent. The trade had been expecting corn, beans and soft winter wheat to remain unchanged, with spring wheat falling just 1%. These crop ratings should provide a little support to market values overnight.
| | Actual | Last Week | Last Year | 5-Year Average |
| Corn Conditions | 64% | 64% | 71% | 69% |
| Soybean Conditions | 59% | 60% | 71% | 66% |
| Winter Wheat Conditions | 47% | 48% | 51% | 58% |
| Spring Wheat Conditions | 16% | 20% | 70% | 67% |
Market direction going forward is going to be heavily influenced by perceptions of what US 2021 crop yields will be. The acreage numbers that the USDA gave us on June 30th will not change until an update in January 2022, so yield is the only component that can change US supplies now. Today’s market action would suggest that the trade is figuring an average USA corn yield in excess of 182 bu/acre, and an average soybean yield of 52.5 bu/acre. Those yields, while certainly attainable, seem when considering what the Western Corn Belt has gone through so far this season.
On the day today, funds were thought to have been massive sellers across the board, liquidating an estimated 30,000 corn contracts (now short 225,000), 30,000 soybean contracts (now short 102,000), and 20,000 Chicago wheat contracts (now short 26,000). With corn futures locked limit down, tonight/tomorrow, corn will trade at expanded limits of 60 cents/bu. December 2021 soybean oil also closed limit down today, so despite the fact that soybean futures did not close limit down, all futures in the soybean complex (beans, oil, and meal) trade at expanded limits tomorrow as well. Soybean futures expanded limits are $1.50/bushel.