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Morning Outlook

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Overnight Highlights

·         The CME Group announced late Wednesday that it will close pit trading for most futures contracts by July, as pit trade now accounted for just 1% of total volume in many cases, with the bulk of trading moving to the electronic platform.

·         The pits are expected to remain open for now for option trade.

·         The dollar opened higher overnight and then slowly saw its strength erode away, while crude oil did the opposite,  although it remains just below $50 this morning.

·         Money began to flow back into the broader commodity complex again this morning as the dollar lost its strength.

·         The European Central Bank moved to restrict loans to Greece’s new government as it refuses to back down from its plans to roll back austerity. Sources within the Greek government say it could run out of money as soon as early next month.

·         Malaysian palm oil surged more than 5% overnight on word that Indonesia will increase subsidies for biodiesel production.

·         USDA is scheduled to release its weekly export sales data at 7:30 a.m. CST this morning.

·         Near-term, rains continue to expand in previously dry areas of northeastern Brazil and expand south in the 6- to 10-day period.

·         Argentine growing conditions remain quite good, with wettest areas in southern and western regions this weekend.

·         The Midwest turned colder for the 6- to 15-day period, but snow cover should protect wheat from winterkill.

Commodity Weather Group Forecast

In the U.S., snow/rain showers (.10 to 50”) fell across the Midwest wheat belt yesterday, while rains (.25 to 1.25”) were also noted in southern LA/GA/SC. Main rains for the rest of this week focus on Pacific Northwest wheat, improving low moisture reserves. Midwest snow will be confined to northeast fringes of the belt in the next week, but strong cold pushes late in the 6 to 10 and 11 to 15 day are not expected to extend sub-0°F readings beyond snow-protected areas.

Showers still likely return to the Delta in the 11 to 15 day and provide more beneficial moisture, but S. Plains showers hold off until the 16 to 30 day.

In South America, Parana was drier than expected yesterday, but rains expanded in central/southwest Mato Grosso do Sul and eastern Mato Grosso. Showers also scattered into Goias, northern/eastern Sao Paulo, northern/central Minas Gerais, northern Bahia, Espirito Santo, and far western Rio Grande do Sul. Rains continue to expand in northeast Brazil through early next week, aiding nearly all coffee/sugar areas and also benefiting late soy growth.

Showers then shift south next week, and stress will remain limited. A few showers may scatter back into northern areas by later in the 11 to 15 day, but interruptions to soy harvest should be minor.  

Argentina picked up showers in central/southeast Buenos Aires and far northwest Cordoba yesterday, with the south/west remaining favored in the near-term (particularly this weekend). A few spots in central corn/soy areas will be most likely to be skipped as showers shift focus to the north in the 6 to 15 day, but all areas will hold onto enough moisture to support good yield potential.

Modestly warmer than normal conditions remain fairly extensive and persistent in much of Argentina and Brazil, but most areas are still not exceeding low to mid 90s on the hottest days.

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

Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK involved in trading futures and or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL. This information is provided freely and is NOT in the capacity of a trading advisor. NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. Information provided is not to be construed as an offer to sell or solicitation to buy any commodity or security named herein.

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