NAPERVILLE, (Ill.): US corn and soybeans are enjoying a shot of seasonably cool weather this week, though a menacing hot and dry forecast for next week and beyond has both farmers and traders on edge.
Corn and soybean yield potential is particularly sensitive to the weather in July and August, which is why the market is often glued to every new forecast model run this time of year, as each update could potentially enhance or change current sentiment.
As of Wednesday, above-average temperatures are predicted to dominate next week in much of the US Corn Belt, centered on Iowa, the top corn producer. Upper 90s Fahrenheit is possible in these areas along with lighter rainfall amounts, stressing the vulnerable crops.
Market participants like to talk about the American (GFS) weather model versus the European (EC) one, especially when they deviate on predictions. The four-times-daily GFS projects out 15 days while the EC, run twice daily, forecasts a 10-day period.
Right now, model biases for the coming days are similar, though magnitudes differ. But which model has been better recently, what are their biases and what might that mean for the forecast ahead? Chicago futures have ripped higher on the threatening outlooks this week, with most-active soybeans up 7.2% through Wednesday, their biggest three-day gain in nearly 13 months.
Corn futures were tempered on Wednesday by weaker wheat and the Ukraine export deal, though futures are up 6.9% so far on the week.
It is possible market-watchers believe next week’s forecast will affect soybeans more than corn since August precipitation is the notorious factor that can make or break US bean yields.
Crop Watch producers across the potentially affected areas say that both their corn and soybeans could be hurt equally by the hot and dry weather next week as kernel and pod abortion could occur, lowering yield prospects.
TRACK RECORDS
Refinitiv’s weather research team tracks the performance and biases of both the GFS and EC operational models across the US Midwest based on the forecasts of days 1 through 9. That means as of Wednesday, the most recent results are from the July 18 runs.
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