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Morning Outlook

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Overnight Highlights

·         Oil led the commodity sector higher overnight, reaching five-week highs on fears of an escalating Middle-East conflict after Saudi Arabia and its allies began air strikes on Iranian backed rebels taking over parts of Yemen.

·         The dollar dropped more than 800 points to new three-week lows overnight on disappointing economic data, adding strength to the broader commodity sector.

·         The European Central Bank made more than 1 billion euros available to Greek lenders in an attempt to keep Greece afloat.

·         Corn prices firmed to new five-week highs overnight on acreage concerns and strength in the broader commodity sector, but gains were limited ahead of next week’s big USDA reports.

·         Soybean prices firmed modestly on strength in the broader commodity complex, but gains were limited by the big South American harvest and expectations of rising acres this spring.

·         Wheat recovered some of Wednesday’s losses on weakness in the dollar and support from dryness in the Plains.

·         Roughly 5% of Argentina’s soybean crop has been harvested, with impressive yields. The government believes that production could exceed last year’s records by 10% this year, despite losses from last month’s flooding.

·         Brazilian safrinha corn should benefit from timely rains over the next 5 days.

·         Light showers should reach central and southeastern areas of the Plains over the 6- to 15-day period, but relief for dry wheat areas should be limited.

·         Rains favor the northern Delta in the 6- to 15-day period.

Commodity Weather Group Forecast

In the U.S., rains favored eastern OK, northern AR, southern MO, southern IL, IN, northern/western OH, and central KY in the past day. These showers will head east fairly quickly today. While a few showers are possible late in the weekend near the OH River, the wettest weather spreads from central TX into the Delta/far southern Midwest early in the 6 to 10 day. Additional showers favor the southern Midwest and northern Delta late next week and again in the 11 to 15 day.

Patchy relief is possible in southern KS in the 6 to 10 day and NE in the 11 to 15 day, but heavier amounts will mostly focus too far east to provide significant relief to Plains wheat areas or the northwest Midwest corn areas. Occasional warmth (80s to low 90s) in the south will also reduce soil moisture as well in the next 10 days. The return of wetter weather near and south of the OH River next week will cause wetness concerns to rebuild for soft wheat and will slow early corn seeding. Pacific Northwest wheat areas have seen beneficial light showers this week and are in line for similar activity in the 11 to 15 day in OR/ID.

In South America, rains (.25 to 1.5”) in Brazil scattered across Mato Grosso, northwest Mato Grosso do Sul, Minas Gerais, and Goias yesterday. Showers increase across Brazil safrinha corn areas through the weekend. The timely rains will enhance low soil moisture in the southeast 1/3 of the belt. Rains focus in the northeast in the 6 to 10 day, aiding late coffee/sugar development.

Showers likely return to key western corn areas in the 11 to 15 day. Soy harvest delays increase in the next 5 days, but a drier 6 to 10 day limits concerns. Rains (.25 to .75”) were confined to the northwest 1/4 of Argentina yesterday. A drier pattern in the next week aids early corn/soy harvest. Most models favor a significant rain event around the end of the 10-day period to slow harvest, but a prolonged wet pattern is not supported by the 16 to 30 day outlook.

Active Shower Pattern to Bring Needed Moisture for FSU Wheat Areas Over Next Week. Showers currently across Europe move slowly but steadily into Ukraine this weekend. Rains are still strongly favored by all models to expand across Russia next week and reach the driest areas of the Volga Valley later next week.

Showers Still Expected to Return to China Wheat Next Week, But Best Rains Delayed. Rains early next week look to be more scattered in nature, but many models are strengthening the rain event for later in the week. Additional showers are possible late in the 6 to 10 day to benefit wheat development across the belt.

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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