CBOT agricultural futures rally amid worsening climate conditions

Jul 18, 2021

CBOT agricultural futures rally amid worsening climate conditions

Chicago [US], July 18: Chicago Board of Trade (CBOT) agricultural futures went higher in the past week amid worsening climate conditions and tightening supplies.
The Chicago-based research company AgResource maintains a bullish outlook for agricultural futures based on surging world demand, with record high freight rates being testament of the demand.
CBOT corn futures ended the week sharply higher as new input strongly suggests the U.S. Department of Agriculture's (USDA) new crop U.S. stocks forecast of 1.43 billion bushels will be the highest of the season. New crop carry-in stocks will be lowered, at minimum, by 50 million bushels due to larger old crop industrial and feed disappearance.
A new threat to 2021 U.S. supply has emerged in the return of heat and dryness across the U.S. Plains and Western Midwest. AgResource notes that new crop stocks of 1.1 billion bushels implies near record low stocks/use amid total 2020-2021 U.S. consumption of 15 billion bushels.
A U.S. weather pattern change will be desperately needed prior to mid-August to avoid yield loss of five to seven bushels per acre (BPA). Corn seasonal lows have formed post July 4 selling when December contract briefly fell to 5.07 dollars.
U.S. wheat and world wheat futures ended sharply higher this week amid concern over EU and Black Sea production, and the outlook will be bullish into winter. The massive loss of North American spring wheat production has been well documented. And now there's widespread concern over quality in Europe as a result of too much rain, and early yields in Southern Russia have been far below prior expectations.
AgResource suggests exporter wheat stocks/use in 2021-2022 will be record low, which will allow wheat's long-term bull trend to continue into the first quarter of 2022. Most important is that there will be zero tolerance for yield loss during next year's growing season.
Soybean futures finished the week higher, supported by firming cash markets and worsening climate conditions across the Canadian Prairies, the Northern U.S. Plains and Minnesota. The July World Agricultural Supply and Demand Estimates (WASDE) report did not offer any surprises, with the USDA holding the old crop end stock forecast at 135 million bushels and new crop stocks at 155 million bushels.
Processors in U.S. Midwest are raising both soybean basis and offers on soybeans and soymeal. Cash supplies are tightening. A rally in the meal market hinges on the U.S. soybean supply as crush will be ample going forward based on the need for additional soyoil supply. As 21.5 percent of the U.S. soybean crop was seeded in the three states of the Dakotas and Minnesota, which are in drought with limited rainfall into August, the price risks for soybean stay to the upside with new price highs forecast for November futures.
Source: Xinhua