TFM Daily Market Summary 7-27-21


Coffee futures prices have rallied to their highest price in nearly seven years as forecast for cold weather has impacted the Brazilian coffee crop.  Brazil is the world’s largest producer of coffee, and severe frost last week damaged many fields in the Brazilian Coffee Belt.  In addition, further forecasts are calling for a third polar air mass to move over the same area later this week, setting up the potential for more additional freeze damage.  It was projected that 11% of the coffee growing region was damaged by the frost event.  The issues could be more longer-term, as the freeze may have killed some of the trees, which it takes to replace.  The total damage is unclear, but coffee prices have risen 35% since the end of June and challenging price levels not seen since 2014.

CORN HIGHLIGHTS: Corn futures traded both sides of steady, eventually closing 1 cent weaker in September, closing at 5.48-3/4 and 0-1/2 cent lower in December to end the session at 5.46-1/4. Crop ratings at 64 good to excellent was down 1% from last week. This compares to 72% from a year ago. Notable decreases were in Iowa, down 3% at 65% good to excellent, Minnesota down 4% at 38%, and North Dakota down 8% at 21%. Michigan and Kentucky lead the nation in high crop ratings, each at 82% good to excellent, followed by Ohio and Nebraska at 76%, Indiana at 73%, Illinois at 68%, and Iowa at 65%. From these numbers you can see the central and eastern regions of the Midwest remain in very good shape. The question is whether these crops can continue to move along at such a strong pace and if the western Corn Belt can receive much needed moisture. It’s getting late in the season to improve significantly, yet if rain occurs in the drier regions late this month or early next month, yield potential may still hold together. For many in the parched regions, however, damage is already likely done and the hope for even an average crop may be diminishing. For now, it looks like the market will continue to mark time waiting for more weather or news to provide direction. Both the bullish and bearish traders have arguments that are worthy, yet both will likely need time to strengthen their bias.

SOYBEAN HIGHLIGHTS: Soybean futures rallied sharply with a gain of 30 cents posted shortly after the pause session. As has been the case recently, gains have failed to hold with prices soon dropping close to steady by the noon hour to eventually finished mixed. August futures closed 5-1/2 cents higher at 14.18-1/4 and November up 1-3/4 to 13.59-1/2. Crop ratings declined 2% points in the good and excellent category to 58%. This compares to 72% a year ago. Only 17% of North Dakota’s soybeans are rated good to excellent. In the same category, South Dakota’s soybean crop is at 26%. Another day with limited rainfall and hot temperatures likely chips away to yield potential. Yet, a lack of positive outside news and traders willing to bet on rain in the extended forecast is keeping prices from holding gains. As is the case with most any market, there will be a lot of back and forth in price activity when there are unknowns. Currently, the market has neither upward nor downward momentum with consolidation a primary feature. Typically, we take this time of the year to become more defensive, especially from higher prices. We will do the same this year but also stay with the bias that prices are position to potentially explode. With no room for error and a crop rating that suggest trendline yield or lower we believe the market is supported in the near term at current price levels.

 WHEAT HIGHLIGHTS:  September Chicago wheat closed down 2-1/2 cents at 6.74-1/2 & December down 2-1/2 cents at 6.84-1/4. September KC wheat closed up 2-1/2 cents at 6.41-1/2 & December closed up 2-1/4 cents at 6.52-3/4. September Minneapolis wheat closed down 1/2 cent at 8.78-1/4 & December closed up 3/4 cent at 8.68. The annual Wheat Quality Council’s spring wheat tour begins today and will run through Thursday. The winter wheat crop is 84% harvested vs 80% last year. The US spring wheat crop is rated at just 9% good to excellent vs 11% last week and 70% last year. Perhaps more interestingly and the bigger impact will be the fact that the poor to very poor rating rose 3% to 66% for spring wheat. The extreme temperatures and drought in the northern Plains continue to take their toll. Moisture is also a concern on the opposite end of the spectrum when we look at China, which has recently been impacted by floods. More rain may be headed their way soon. One heavily impacted Province, Henan, accounts for about 10% of China’s total grain production. While most of their summer grain harvest was completed before the floods, there could be major impacts to storage, processing and logistics. In southwestern Russia we are seeing a hot and dry pattern, which should be watched closely.


Bryan Doherty

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