What Traders are Talking About:
* Corn crop ratings stronger than expected. USDA signaled as of Sunday 72% of the corn crop was rated in the top two categories -- unchanged from last week, although there was a 2 percentage point shift from "good" to "excellent." The very modest uptick in crop condition ratings (more of the crop rated "excellent" than the previous week) caught traders a little off guard. A Reuters poll of analysts expected the good/excellent percentage to drop 1 point from last week as southern and eastern areas of the Corn Belt generally missed last week's rains. When USDA's weekly crop ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 = crop failure; 500 = perfect crop), the corn crop held steady at 381. Meanwhile, USDA's first soybean crop condition ratings of the season showed 65% of the crop rated in the top two categories. On the Pro Farmer CCI, soybeans started with a 363 rating.
The long and short of it: USDA's crop condition ratings initially pressured corn overnight, but the market is firmer this morning as traders are expecting a downtick in crop condition ratings in next Monday's update given forecasts for warm, dry conditions this week.
* Weather watch intensifies. Forecasts continue to call for seasonal to slightly above-normal temps and limited rainfall chances across the Corn Belt this week. But there is some concern given Monday's temps exceeded expectations in most areas. While the warmer temps will promote rapid crop growth in areas that received beneficial rains last week, they are taking a toll on crops in areas where soil moisture is depleted. The National Weather Service forecast for June 10-14 is a little more encouraging. While it keeps the above-normal temps in the outlook, rainfall chances are seen as mostly normal across the Corn Belt with a bubble of above-normal precip over northwestern Iowa, far northwestern Nebraska, the far eastern Dakotas, Minnesota and northern Wisconsin.
The long and short of it: Reports from producers in the eastern and southern Corn Belt signal corn is rolling given the lack of moisture. Given the advanced maturity of this year's crop, these driest areas are quickly approaching the critical juncture (some are already to that point) where the crop needs moisture now or yields will suffer.
* El Nino on schedule to arrive late summer/early fall. Tropical Pacific conditions remain neutral, according to the Australian Bureau of Meteorology, but El Nino is on the way. The bureau says all seven of the indicators it tracks point to the arrival of El Nino by late summer/early fall. This forecast is consistent with what Australian scientists have been indicating for weeks.
The long and short of it: The timing of the onset of El Nino is key as the weather phenomenon typically is associated with favorable weather across the Corn Belt. If El Nino is delayed until early fall, it would have limited benefit to crops. But if El Nino sets on quickly, there's still plenty of time to have a positive impact on this year's crops.
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