The Good: The GFS forecast model pushed moisture into the Northern Plains and eastern Canadian Prairies in the 12Z model run when compared with the previous run at 6Z. This may have caused the market to move lower, but the idea that the chances of improved precipitation next week certainly is appealing. Unfortunately the model runs are putting this precipitation into the back half of the forecast, which is the least certain. As we move into next week, hopefully the precipitation is going to remain in the forecasts and actually provide some beneficial precipitation. Welcome to the weather market!
The Bad: The wheat, corn and oilseed markets responded negatively to the forecast change with the nearby and new crop contracts moving sharply lower. Spring wheat futures saw modest declines as the market decide to wait for upcoming model runs for confirmation of increased rainfall chances. The September Minneapolis contract closed down 5.5 cents per bushel to close at US$7.83 per bushel. The market is likely to be under pressure tomorrow as the trade will take some risk off the table for the weekend. That is if the forecast remains wet in the 6-10 day time frame. If the forecast turns drier, all bets would be off for Friday’s trading direction.
The Ugly: All it takes for a commodity to go from hero to zero is one trading day. The nearby (July) soybean oil futures pushed over 72 U.S. cents per pound in the overnight session, but plummeted back to reality when trading resumed in the regular session. July soybean oil futures closed today at 68.87 U.S. cents. Despite lower soybean markets, crush margins for new crop positions are still above the C$160 per tonne mark. This is because canola futures dropped as well in the new crop months. Watch soybean oil in trading tomorrow as lower soybean values and precipitation in the forecast would significantly pressure canal markets.