Market analyst: Dome of doom
The "dome of doom" forecast continues in the corn belt.
It's an extremely bullish development that is probably most notable in soybeans, as the row crop needs rain and moderate temperatures through August for optimal yields. It looks like it will be the opposite unless the "dome of doom" breaks up relatively quickly.
The 'dome of doom' represents high pressure systems that set up directly over the Corn Belt, preventing any significant rain from entering the corn belt. The dome forecast solidified around July 16 and has been solidly in the forecast for the past four to five days.
The 14-day forecast includes below normal precipitation and above normal temperatures for the entire Corn Belt. So far, that means little damage in the southern half where rainfall has been plentiful for the entire summer and temperatures were good for pollinating corn. But for soybeans, it could reduce the record yield potential in the lower half, as well.
In the central Corn Belt, recent heavy rains last week are a cushion against the threatening status of the dome; if the dome lingers through August, we might see some pollination impacts due to warm temperatures and maybe some yield potential reduction as well. But it's likely we will produce at least an average crop, although the yield potential could be reduced one to two bushels in corn and one to 1.5 bushels in soybeans. This is a major issue in soybeans, though, as we have virtually no carryout now.
In the northern Corn Belt, the dome could be devastating to yield potential and reduce corn potential yields five to ten bushels per acre and soybeans three to eight bushels per acre, depending on the severity of the heat and drought. Already, this area has a disaster unfolding, with yield potential in Minnesota, North Dakota and South Dakota already at five-year drought levels (10% or more below average), and that will quickly drop to 25% below average or more if the dome lasts through August. High temperatures this week could damage some pollination of corn as well, which is exacerbated with lack of rain.
Yesterday, the grain market was unchanged for corn prices, lower for beans and only slightly higher for spring wheat in spite of the dome, because the rest of the world's markets were decimated by COVID-19 fears again (crude was down more than five dollars and stocks down 900 points).
Considering the debacle in U.S. and world markets Monday, grains performed rather well due to the bullish "dome of doom".
Ironically, the 'ring of fire' around the dome might include spring wheat country, which is generating some pop-up showers that included Fargo, North Dakota on July 19 and parts of Canada on July 20. However, the amounts were mostly light and coverage small (for example, just 50 miles east of Fargo there was no measurable rainfall). For spring wheat, this will only hinder harvest next week, but might benefit corn and soybeans in the region.
Crop progress yesterday showed a stable crop nationally, with corn conditions unchanged at 65% good/excellent and soybeans plus one percent to 50% good/excellent. The Pro Ag yield models improved fractionally to 178.7 bushels for corn (+0.6 bushels) and 49.83 bushels for soybeans (+0.13 bushels). That is 1.7 bushels above trend in corn, and 0.4 bushels below in soybeans. But soybeans have no carry cushion on these yields and is in the most jeopardy from the dome.
So the extreme situation in soybeans continues, although we are starting out with near trend yields July 20. These could still be trimmed substantially in corn, and even more significantly in soybeans (where there is no room for additional yield loss).
Unless the world economy collapses, we could have an explosive situation in grains should the "dome of doom" last through August. But make no mistake, soybeans are in the crosshairs of an explosive market and will be the leader at least into September because the soy fundamentals can change the most in the shortest period of time.