Midwestern Flooding is Significant Influence in Grains Today
A higher to sharply higher start is expected in all pits this am, 15-20 wheat,12-15 corn and 20 beans. Crude oil is sharply higher,the $ is lower, Dalian, China grain futures are higher and Malaysian palm oil futures gained 37 ringgit, all bullish influences for our grain market.
The biggest bullish influence by far is the wet weather, which has caused widespread flooding in large parts of Iowa and some parts of other midwestern states. This will cause replanting of beans, switching of acreage from corn to beans, and, in some cases, no planting at all due to how late it is in the season. What planting is done now will likely result in much below trend yields. All of this will lead to a lower than previously expected crop for both corn and beans. Of course, a lot still depends on weather the rest of the season with the most important month for corn July and August for beans. Good weather the rest of the season, especially during these two months, will avert further crop losses and could still produce a good sized crop, although probably not as large as needed.
The forecast this week is for mostly dry weather in the midwest until Thursday in the west and Friday in the east, when scattered rain is forecast. Amounts are not expected to be heavy but any rain later this week will still be unwelcome and delay drying of flooded fields as well as replanting efforts. In the southwest, widespread rain this week will cover most of the region, delaying harvesting of the winter wheat crop. The 6-10 day outlook calls for more wet weather, which could further delay harvest progress. The midwestern 6-10 calls for wet weather in the western corn belt but below normal rain in the east.
Welcome rain is forecast this week in the dry Argentine wheat belt. Australia had some much needed rain in parts of its wheat belt over the weekend with more light rain forecast the second half of this week. However, a government official with the main wheat growing state, New South Wales, said dry weather last month increased the area of the state that has slipped back into drought status to over 60% from 48% the previous month. Several Australian forecasters have cut their estimate of the size of the upcoming wheat crop due to the mostly dry weather pattern seen over the last month. The official Australian government wheat production forecast will be out Tuesday from ABARE, the Australian Bureau of Agriculture and Resource Economics.
Argentine farmers have restarted their strike, holding beans off the market and blocking roads at least through Wednesday following the arrest of one of their leaders over the weekend. The longer this situation drags on, the more export business in beans, meal and oil is likely to be shiftedfrom Argentina to the US and/or Brazil, which is bullish for the nearbys in the bean complex.
July corn has made new all time highs the last 7 days in a row and should make it 8 in a row this morning! Look for strong prices in all pits all day. ---Vic Lespinasse
