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3 Big Things Today, August 9

Wheat Futures Higher Overnight; Comparisons to 2011 May Indicate USDA Moves on WASDE.

1. Wheat Futures Higher Overnight as Drought Persists in Northern Plains

Wheat futures were higher in overnight trading as the weather in the Northern Plains remains dry, further stressing the U.S. spring crop.

Almost half of North Dakota, the biggest producer of spring wheat, is in an exceptional or extreme drought, the worst designations possible, according to the U.S. Drought Monitor in Lincoln, Nebraska. Only 3.1% of the state is not suffering from a lack of precipitation, and that’s a sliver on the eastern edge.

About 13% of South Dakota is also in an extreme or exceptional drought, the monitor said. A third of the spring wheat crop was rated good or excellent as of Sunday.

Some rain may fall in the Northern Plains today but the rest of the 10-day forecast looks dry, according to National Weather Service maps.

Wheat for September delivery rose 2¼¢ to $4.59¼ a bushel overnight on the Chicago Board of Trade. Kansas City futures added 1½¢ to $4.62 a bushel.

Corn futures for December delivery rose ¾¢ to $3.84½ a bushel in Chicago.

Soybean futures for November delivery added 2¼¢ to $9.75 a bushel. Soy meal was unchanged at $314.30 a short ton, and soy oil futures gained 0.12¢ to 34.34¢ a pound.

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2. Comparisons to 2011 Crop Year Valid, May Be Indicator of What USDA Does in August WASDE

Ted Seifried, a broker at Zaner Ag Hedge Group in Chicago, said in a note to clients that many analysts have been comparing this year with 2011. 

The similarities are there. Crop conditions started near 70% good or excellent and have dropped to 60% for both corn and soybeans this week, with the biggest declines in ratings coming during critical growth stages.

“This makes 2011 a likely analogue year to make comparisons to. In 2011, the USDA aggressively dropped yield on both the August and September reports only to have to reverse themselves and move yield higher again by 4.6 bushels an acre for their final number,” Seifried said. “For this reason, the USDA has been more conservative recently and this could impact the August report.”

The average trade guess is down 5 bushels an acre from last month at about 166 bushels an acre, but it’s possible that the trade is expecting too big a drop too quickly. The evidence from the Crop Conditions Report warrants the decline, but the USDA does what the USDA wants to do.

“But, even if they do not (drop yield that much) on the August report, it might be more about the direction they are going,” Seifried said. “I would say that even a modest drop in yield in the August report – even if it is less than expected – might be a good signal for what is to come of future reports.”

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3. Showers Wednesday, Thursday Expected to be Intermittent, Isolated

Storms expected in much of the Midwest today will be very intermittent and isolated, according to the National Weather Service.

“Isolated storms are possible after midnight in the northwest sections of” Iowa with the main threat being lightning, the NWS said in a report early Wednesday.

Scattered thunderstorms may redevelop across much of eastern Iowa and western Illinois on Thursday but there’s little threat of severe weather, the agency said.

Farther west, storms in eastern Nebraska are expected to be stronger with some severe weather in the mix for today. Hail is a possibility as are strong winds, but the severe storms are expected to be isolated to northeastern Nebraska, the service said.

The chance of rain on Thursday is variable with only intermittent precipitation forecast, according to the NWS.

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