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UPDATE for June 28th, 2023

Ring of Fire Expected to Bring Storms to Corn Belt

Friday the USDA will release the June Planted Acreage and Grain Stocks report. This will give us the latest estimate of the number of acres planted and the quantity of old crop grain remaining in storage. This report, the latest weather models and the upcoming holiday are all pressuring the market. As we move into July the data dump from this report will hold less importance in market movement and weather will be most impactful.

Again, this week U.S. corn ratings declined. The U.S. overall average GD/EX rating fell by 5 percentage points down to 50% while the Poor to Very Poor rating increased by 3 points to 15%. This is the lowest GD/EX rating for this week seasonally since 1988. For comparison this same week in 2012 the GD/EX rating was still 56%. States with a GD/EX rating less than 50%:

• Illinois the number 2 top corn producing state in the U.S. fell by 10% from last week’s GD/EX rating down to 26%

• Michigan’s GD/EX corn rating now sits at 28%

• Missouri saw a 12% drop in GD/EX down to 31%

• Wisconsin is now at 42% GD/EX

• Indiana and South Dakota both have a GD/EX rating of 47%

Weather and demand are both working against prices right now. Forecasts look wetter through next week and the trade is betting these rains will go a long way towards turning the crop around. In regards to Friday’s report the trade is expecting corn stocks to total around 4.250 billion bushels and a small decrease in planted acres. One of biggest debates now is whether the decrease in demand we’ve been seeing can be offset by setbacks in new-crop production…. and if the (potential) losses in production will be large enough to change the nearby balance sheet.

This week the U.S. soybean GD/EX rating saw a 3% decrease and now sits at 51%, the worst seasonal rating in 13 years. Looking back to this week in 2012 the soybean crop was rated at 53% GD/EX. Notable drops in key states:

• Illinois, the number 1 producer of soybeans in the U.S. saw the GD/EX rating fall from 33% a week ago down to 25% this week.

• Iowa the number 2 producer of soybeans saw GD/EX rating fall by 8% this week down to 48%.

• Indiana and South Dakota both sit at 47% GD/EX

• Wisconsin is now at 45% GD/EX

• Missouri fell by 12% this week down to 32% GD/EX.

• Michigan’s soybean crop has dropped to GD/EX rating of 23%

Brazil’s president has presented a plan to improve government ties with the nation’s ag industry while also increasing production. The plan is to provide 76 billion in financing for medium and large producers an increase of 27% from the previous cycle. This new plan includes an 81% increase in resources needed for the building of storage facilities which are in great demand following record yields this past season. It also offers lower interest rates for farmers that implement environmentally friendly practices.

Russia has basically blocked all Black Sea shipments from Ukrainian ports. This will force Ukraine to focus most of their exports through ports along the Danube. The head of Ukraine’s Sea Ports Authority said, “With Russia effectively blocking the operation of the grain corridor, we need to be ready to receive almost the entire export volume of the new harvest through the Danube ports.” This will require significant changes from previous grain export practices. Previously about half of all Ukrainian agriculture exports were through ports located along the Black Sea, a quarter of exports were moved through the Danube and the remaining quarter via the western border. Now only one access to the Black Sea will still be accessible to Ukraine. This is the Constanta port located in neighboring Romania. This port has been handling about a third of Ukraine’s exports since the invasion, but Romanian officials are considering limiting the use of the port during the harvest season to Romanian agricultural products only.

According to the U.N. Joint Coordination Centre, China was the largest recipient of food and feed from the Black Sea region during the time the Grain Deal was functioning. Records show that as of June 20th Ukraine has exported 32.1 MMT of food, feed grains and oilseeds shipped under the plan with 24% destined for China, 5.6 MMT’s of this amount was corn. (World Grain)

Weather forecasts for the central U.S. Corn Belt finally show rain for a major portion of the Midwest including Illinois, Indiana and Iowa. These opportunities for rainfall are largely the result of the Ring of Fire pattern that has set up across the south-central U.S. Temps will remain in the +100’s for several days in a row in some of these areas within the heat dome (high pressure ridge). Along the periphery of the heat is where storm tracks can develop. Typically storm clusters develop at night as the low-level jet increases after sunset. With fuel from both the heat dome and the humidity the ingredients are present for both significant rainfall totals and severe weather. Today and into the weekend rainfall chances will steadily increase. Rainfall chances during this period will increase as the Ring of Fire reaches its peak Sunday. Within the heat dome itself the air is capped preventing any storms from developing but the area around the northern edges of the high-pressure ridge are ripe for the development of thunderstorms. In the map below note the location of the Ring of Fire, the nighttime Jetstream will provide the lift needed to allow for the development of storm clusters from Nebraska to the Great Lakes.

Maps from the GFS and EURO show expected rainfall totals for today through Monday, July 3rd.

NOAA’s Total Precipitation map illustrates the outlook for the next 7 days. This is followed by the 6-to-10-day precipitation and temperature outlooks.

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