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Morning Outlook

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Overnight Highlights

·         Greek leaders are appealing to the European Central Bank not to cut off the money supply, even though they have indicated they do not intend to make some of their debt payments. They are not lobbying other debt-ridden countries to join their cause.

·         Energy prices popped higher on short-covering overnight amid uncertainty surrounding the largest oil workers’ strike since 1980, although eventually the strike should be bearish crude oil and bullish the products if it continues/expands.

·         Crude oil also garnered strength from data showing a falling U.S. rig count, suggesting lower production down the road.

·         The odds of additional stimulus for China grew this weekend when data showed that its manufacturing sector contracted for the first time in more than two years. China’s revenue growth is the weakest since 1991 and its stock market just saw its largest drop in a year.

·         Grain and oilseed prices bounce on ideas that more stimulus could result in more business, although the overnight spike in energy prices probably provided more support.

·         Saudi Arabia bought 24.2 million bushels of optional origin hard wheat over the weekend, but exporters expect the bulk of the wheat to come from Europe.

·         Patches of Parana and Mato Grosso most likely will be short-changed on rain over the next 10 days, which favors harvest, but does not favor pod fill for late-maturing crops.

Commodity Weather Group Forecast

In the U.S., showers (.25 to 1.5”) were widespread over the weekend in winter wheat areas of the Midwest, Delta and all but the northwest 1/4 of the Plains. Snowfall was mainly 4 to 10” across the northern 2/3 of the Midwest wheat, with locally up to 16” in northern IL. Sub-0°F readings are likely over the snow-covered wheat areas, but the snow will minimize damage. While showers will be limited in the next 10 days, most wheat areas are in fairly good shape after the beneficial weekend showers.

Showers return to the Delta and possibly the S. Plains in the 11 to 15 day and would provide more beneficial moisture. Rain potential improved in Pacific Northwest wheat for the next 10 days and will enhance soil moisture.

In South America, showers favored central/southeast Minas Gerais, far northeast Sao Paulo, southwest Goias, west-central/northeast Mato Grosso, northwest Bahia, and parts of eastern Mato Grosso do Sul over the weekend but were below expectations overall in central Brazil. Models remain very wet in central/northern Brazil in the next 10 days, and our forecast scales this back somewhat given the recent wet bias. However, rains still reach all coffee/sugar areas with welcome moisture.

About 15 to 20% of the soy areas could be short-changed, with the main risks in parts of central Parana, northwest MGDS, and central/southwest Mato Grosso. However, the lack of a wetter pattern will also aid early harvest in Mato Grosso.

Occasional showers will favor the north/west in Argentina this week after the mostly dry weekend, but this week’s forecast is drier than back on Friday. Significant rains return in the extended outlook, particularly in the 6 to 15 day and early in the 16 to 30 day. While there are no immediate threats, this will need to be watched in saturated central/northeast corn/soy areas.

Morning Market Snapshot

 

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.

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Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY® | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

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