Prices Fall Despite Worsening Crop Conditions & The Latest Weather GFS and EURO Weather Models
Update for June 17th, 2021
The market is closely monitoring both weather and crop ratings but at this time its very evident that weather models are much more important to them than the ratings right now. Yesterday the EURO model changed from a promising outlook for widespread, meaningful precipitation to much drier which sent markets higher. Overnight some areas received precipitation and more is in the forecast for next week so today markets reacted closing sharply lower. This type of volatility in grain prices will likely continue for the next several weeks.
This week’s USDA GD/EX crop ratings for corn fell by 4% nationwide. What is even more important within that overall rating drop is where the decline in crop conditions is occurring. Several of the nation’s top corn producing states are where the crop is suffering most:
North Dakota posted a new all-time low with only 24% of the crop considered to be in the top GD/EX category!
Iowa-the top corn producing state in the country is dry. The GD/EX crop rating fell by 14% from 77% last week to 63% this week.
Minnesota’s GD/EX rating deteriorated by 11% down to 58[RS1] [RS2] %
Illinois was lowered by 6% to 68%
Wisconsin was 5% lower
Ohio GD/EX was reduced by 4%
These ratings were offset by improved crop ratings in Colorado, North Carolina and Pennsylvania. So, while the total GD/EX percentage was only off by 4% from the previous week you have to wonder what this is doing to total production in the end when the states seeing improvements are not key U.S. corn producing areas but states with the most significant reductions are.
Soybean GD/EX crop rating was also downgraded this week. The USDA lowered their estimate by 5% this week from 67% to 62%, considerably lower compared to last year’s rating of 72% GD/EX. Again, like corn the states seeing the largest decline in conditions are the top soybean producing states:
Iowa’s GD/EX rating fell by 12% off 21% from this time last year
Illinois was reduced by 10%
Minnesota down 9%
Wisconsin GD/EX down 7%
States showing some improved conditions this week include Louisiana, Nebraska and North Carolina.
The soybean market needs some bullish news. Lately there has not been a lot of good news as recent data shows disappointing domestic crush numbers alongside declining exports. The seasonal switch in Chinese buying has arrived, shifting soybean purchases away from U.S. exporters and are now importing most soy needs from South America.
Last week Reuters reported that the EPA and Biden administration were considering options to relieve refiners of blending requirements following a request from oil refiners, labor unions and some U.S. Senators. This sparked considerable concern from several U.S. lawmakers in the U.S. Senate and House and in response they wrote a letter to the EPA and the National Economic Council asking that any such action be rejected. The letter signed by lawmakers from Iowa, Illinois and Minnesota was sent yesterday which read, “We support your efforts to address climate change, but we are concerned that rolling back the RFS obligation for refiners directly contradicts this work. Following through on the actions reportedly under discussion would directly undermine your commitment to address climate change and restore integrity to the RFS and we urge you to reject them.” The letter instead asks the EPA to issue a proposed rule for renewable volume blending obligations for 2021 and 2022 with “strong blending targets”. It also requests that the agency respond to a court ruling that ordered the reinstatement of 500 million gallons of blending requirements that were waived from 2016. The Renewable Fuels Association applauded the letter. RFA President Geoff Cooper released a statement saying, “We’re grateful to these congressional champions for standing up for our nation’s producers of low-carbon ethanol and other renewable fuels.”
Another matter of concern facing farmers is the decision from the Biden Administration to roll back the former Trump administration’s Navigable Waters Protection rule.
U.S Senator Chuck Grassley (R-Iowa) is pressing the U.S. Agriculture Secretary Tom Vilsack-also an Iowan on these recent actions by the Biden administration which Grassley believes will cause harm to Iowa and the entire U.S. agriculture industry. In a letter this week Grassley and fellow Iowa Senator Joni Ernst said, “Policy changes in Washington have a major impact on the livelihoods of our of our farmers.”
AgriTalk host, Chip Flory held an interview with Chuck Grassley this week to discuss the Biden proposal in detail. Grassley said he hopes to address the subject of WOTUS on the Senate floor yet this week. He said, “I intend to have a map of Iowa that will show that 97% of the land of Iowa is now affected by the waters of the U.S. rule that came out under Obama, and how devastation that would be to agriculture, from the standpoint that almost any rules that a farmer might have to make would be subject to federal regulation of one sort or other.”
Latest data from the U.S. Drought Monitor shows that nearly 10% of the contiguous U.S. is now classified at the “exceptional drought” level, the largest percentage seen since 2011. The states of California, Oregon, Utah and Nevada are now entirely under drought conditions and the intense dome of heat that has been present all week is only adding to drought conditions in many regions. The Crop Progress report Monday showed that soil moisture levels are declining. Slightly over 50% of U.S. soil is considered to have “adequate” soil moisture while 38% has soil moisture levels of “short to very short”.
Map released: June 10, 2021
Data valid: June 8, 2021
WeatherTrends 360 reports that drought phases made a big jump this week with 61% of the country dry which matches closely with this same point of the season in 2012 and 2001.
The GFS and EURO weather models both show precipitation across the Upper Midwest and Corn Belt over the next week. The trade will be following these models very closely as we lead up to the Acreage report on June 30th.