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UPDATE for July 7th, 2023

USDA Reports, Rainfall Totals and Another Ring of Fire Possible

Corn prices plummeted last Friday following the Planted Acreage report that shocked the market with over 2 million more corn acres than the March Planting Intentions report had projected. Conversely, soybean prices rocketed higher as planted acreage fell by 4.2 million acres compared to March expectations.

Corn Acreage Change vs. March by State

Illinois +500,000

South Dakota +300,000

Iowa +300,0000

North Dakota +150,000

Minnesota +50,000

Indiana UNCH

Soybean Acreage Change vs. March by State

North Dakota -900,000

Illinois -800,000

Iowa -400,000

Missouri -400,000

Kansas -350,000

Nebraska -250,000

Ohio -200,000

Wisconsin -200,000

Minnesota -50,000

This annual report has a reputation for producing market volatility due to the nature of how the calculations are made. Acreage numbers used in the June report are based primarily on surveys conducted during the first 2 weeks of the month. “We know that switching and plans changed vs. the March farmers surveys. We also know that the survey response rates are typically very low, which makes the data tricky.” Comparing final acreage totals to the March Intentions estimates since 2008 there have only been 3 years in which there was an increase in acreage, typically corn losses some acres over the course of the growing season.

Corn crop ratings this week were as expected, traders were already anticipating the 1% improvement which brought the GD/EX corn rating up to 51%. This is the worst seasonal rating since the 2012 season when the GD/EX rating was 48%. The soybean ratings fell by 1 point to 50% GD/EX this week making it the worse seasonal rating for the U.S. soybean crop since 2012 when the crop was rated 45% GD/EX.

So how does the total precipitation in June of 2023 compare to other years? While the final days of the month delivered some meaningful rainfall totals to dry regions the Corn Belt this year is still one of its driest on record. In fact, some sections of Illinois saw the driest conditions they have had in over 120 of 131 years.

A new trade war may be developing between the U.S. and China. Monday Beijing announced new controls will be placed on the exports of gallium and germanium to the U.S. These minerals are key ingredients used in the production of semiconductors, electric vehicles, solar panels and aerospace manufacturing. According to the U.S. Geological Survey, China supplies approximately 67% of the global germanium and 86% of the gallium. In response the Biden administration is working to restrict the access of Chinese companies to U.S. cloud-computing services that use AI chips. The extent to which the Chinese plan to enforce the export ban and their ability to prevent the circumvention of these export controls is unclear.

According to U.S. analyst and Drought Monitor author Brad Rippey, “The last time more corn was in drought during the heart of the growing season was, as you might expect, the summer of 2012. That year, the U.S. corn production area in drought was at or above 70% each week from July 10 through the end of the calendar year.” More of the soybean crop finished in drought in 2012 but those impacts showed up later in the growing season.

The Ring of Fire storms that developed in late June and early July definitely relieved some of the dryness in some of the hardest hit areas across the Corn Belt. The following map shows the total precipitation received as a result of these storm systems from June 26th through July 5th.

Nationally the latest drought monitor shows some minor improvements in select regions. Currently 87% of the country is considered to be abnormally dry which is a 3-point improvement from the previous estimate. The percentage of the U.S. in D1 (moderate drought) remains at 63%, the portion of the country experiencing D2 (severe drought) is virtually unchanged. As Rippey explained, drought has built up over many weeks and it will take significantly more rainfall than we have received for those conditions to improve.

The following map shows where adjustments in the drought have occurred. But as Rippey explained, “Significant rainfall deficits built up in May and June. Recent rains are helping, but normal weekly Midwestern rainfall this time of year is roughly 1 to 1.3 inches per week. The two-week Drought Monitor

Class Change map shows patchy areas with improvement, mainly in the southern and eastern Corn Belt.”

Some extremely variable rains have been more frequent in recent days across more of the Midwest. According to Rippey this is a result of a slight change in the high-pressure block. “There have been subtle changes in the North American weather pattern. There is still a high-pressure block, but it has shifted further north and east and is currently centered between Canada and Greenland. That is allowing some cool, dry air to push southward from northern and central Canada.” He also said that there is still a strong ridge of high-pressure present across the southern tier of the country which will create a battle between cool and warm air. “Over the next week or so, the heaviest rain will fall near the boundary between the cool Canadian air and the hot air across the nation’s southern tier. Recent forecasts are showing the most significant rain falling a bit further south than earlier expectations, which could leave parts of the Midwest, especially the northern Corn Belt with little rain over the next seven days.”

Next week additional cool Canadian air is forecast to move into the Midwest which will also bring with it the chance for a shower or thunderstorm. The best chance right now appears to be around Tuesday-Wednesday.

Both the EURO and GFS models are warning of the possibility of another heat dome developing during the period from July 18-21st. The expected timing of the event gives more confidence in the accuracy of the early trend models. It’s still too early to be certain the heat dome will develop but the following EURO and GFS maps indicate the expected highs for July 21st.

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