Excellent weather outlook moves grain trade

Corn: Weather is good through Aug. 10. A 6.5-inch rain across southern Wisconsis and northern Illinois might have caused some damage to crops, but the benefits were tremendous and widespread. The rains hit the driest areas of the Midwest. Pockets of dryness in southern Illinois, eastern Kentucky and southern Indiana remain. Heat will intensify on day 16-18 of the maps, but no blocking ridge is expected. Yield damaging conditions are not likely.

Crop conditions were unchanged Monday at 72% good to excellent. This might be considered friendly to some as a few traders were thinking they would be up 1%-2%. We did not. Normally, conditions decline at this time of year, so we thought conditions would be unchanged and that 72% good to excellent would reflect a good crop. Last year, conditions were 70% good to excellent. The industry debate is still very volatile about whether or not this crop can top last year’s yield. Allendale studies still suggest a 163+ yield is likely. We will soon be getting your input with our annual yield survey…Bill Biedermann

Soybeans: Monday morning we were given a weather forecast of nearly ideal conditions all the way out to the 16-day forecast. All areas were included in that forecast as well. Places that received large rains over the last five days now look to dry out and other areas that missed those rains look to pick up meaningful totals over the next week.

Bearish weather is certainly a factor that can crush other bullish news. We saw that Monday morning when it was announced that a new sale was made to China totaling 226,000 tonnes. Instead of opening steady, the beans started ten lower and ran from there. Another possible factor that could have supported this market is more fund buying. A major problem with relying on funds for bullish help is that their net position is estimated to be long just over 100,000 contracts and that is typically an area that their buying would stop.

Many customers have asked if funds will now turn to sellers, especially if the weather holds bearish. We want to remind everyone that funds are generally not quick to turn over as sellers. This is one reason why we look for the beans to grind lower instead of going into a free fall.

What weather bulls have to hope for is a change in the extended forecast. They simply can’t wait for the forecast to turn poor during the middle of August. With the crop as far ahead as it is, that mid-August outlook may already be too late. For many areas, early August may already determine yields. Now that weather has proven to take control, we have to view bounces, for any reason, as a gift to be sold from. This market likes China purchases but is getting bored unless a large number is thrown out. It also likes fund buying but their current length suggests they may choose the sidelines more often. Bullish factors are disappearing and we choose not to bet on weather…Ryan Ettner

Wheat: Do not confuse winter wheat with spring wheat; it is like comparing apples to oranges. Minneapolis spring wheat is typically higher in value, then comes KCBT and finally CBOT wheat. As an example when looking at the Sept vs Dec CBOT wheat spread, it does not suggest a demand-driven market but continues to trade the range, likewise for KCBT Sept vs Dec and sideways and tightest range for MGEX Sept vs Dec.

Weekly wheat inspections were viewed as bearish to futures as they came in below expectations. Fundamental news suggests profit taking occurred in Europe early Monday morning as news is largely unchanged as most are aware of the high heat and smaller Black Sea wheat crop.

The spring wheat tour covering the states of North Dakota, South Dakota and Minneapolis is this week with results scheduled on Thursday, July 29. Allendale Inc anticipates the tour is likely to come up with good yields and good quality. Weather as of three to five days out is good for spring wheat within the United States and bearish to futures…Joe Victor

Bill Biedermann is Sr. Vice President at Allendale. Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Joe Victor is Vice President at Allendale. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.

About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com

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