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Morning Outlook

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Overnight Highlights

·         Greece submitted a new budget plan for accessing emergency aid, but one European official stated that it was “nothing new.”

·         In a bit of an oddity, both the dollar and euro are trading modestly lower this morning, with crude oil posting significant gains.

·         Crude oil pushed higher on expectations of more stimulus in China after more disappointing economic data from the region.

·         The Australian Bureau of Meteorology warns that it’s seeing the most widespread El Nino signals since the great El Nino of 1997-98. El Nino patterns in the Pacific tend to favor good growing conditions in the U.S. Midwest.

·         USDA reported late Monday that soybean planting as of Sunday was just 79%, falling short of trade expectations, with significant delays in the southwestern belt raising concerns about decreased acreage and yields.

·         Corn condition scores ticked slightly lower this week, with my yield model losing 0.5 bushel to 168.5 bushels per acre. Ohio has the highest corn ratings, while Kansas has the lowest due to excessive moisture.

·         Both winter wheat and spring wheat condition scores ticked modestly lower this week, with harvest of the winter wheat crop at 4%, falling short of trade expectations of 5%.

·         The outlook is quite wet for the next 10 days for much of the central Plains wheat belt and Midwest Corn/Soybean Belts.

·         Low 90s F were seen in dry western areas of the Canadian Prairies yesterday, with just minor relief expected Friday into next week.

·         Drier trends are seen for Russian corn/wheat areas next week.

·         We may be in an El Nino, which favors high U.S. yields, but I think we need to be increasingly concerned about excessive wetness in the Plains and parts of the Midwest, combined with dryness in other key production areas of the world, particularly for corn and wheat, to temper some of the bearishness built into the market.

Commodity Weather Group Forecast

In the Midwest/Delta, thunderstorms scattered across mainly southeast MO, southern IL, northern/eastern IN, far western OH, south-central/east-central MI, central/southwest TN, southern KY, and northern MS in the past day.

A very active week begins on Thursday in much of the Midwest, with pockets of excess rain likely in NE/KS/IA/southern MN/WI/northwest MO this week and KS/MO/southern IA/IL/IN/OH in the 6 to 10 day. This will also continue to stall late soy seeding in delayed sections of KS/MO, but the bulk of the moisture will be favorable for corn/soy growth.

More limited rains in the Delta will aid soft wheat harvest and limit wetness concerns in the next 30 days. Highs peak in the mid-80s to low 90s at mid-week in the Midwest but otherwise are more modest through the next 2 weeks. The 16 to 30 day remains mild/showery in the Midwest. While a few showers occur today and in the 11 to 15 day, mid 90s to low 100s in the 6 to 15 day stress pollinating corn in SC/GA.

In the Plains/Canada, mostly dry weather prevailed yesterday, with highs in the low to mid 90s in southwest Saskatchewan/southern Alberta. Heat will not be as severe in Canada for the rest of the week, and scattered showers from Friday into the 6 to 10 day offer some limited relief but focus along the edges of the belt. With a return of drier/warmer conditions in the 16 to 30 day, yield losses remain a threat, particularly in the western 1/3 of the belt. N. Plains spring wheat remains in good shape.

Winter wheat harvest will slow in the S. Plains from Friday into the 6 to 10 day and will cause localized flooding in southeast NE/KS/western OK/northwest TX, but the wettest weather focuses on the C. Plains in the 11 to 30 day.

Models Favor Expanding Rains for Europe Wheat Areas Next 10 Days, But Russian Rain Potential More Limited. Rain prospects improved further for northern Europe wheat, with only northern Germany at risk of being short-changed. Showers are likely to expand into central Ukraine, but rains should falter in eastern Ukraine/southern Russia.

Dryness in N. China Plain Corn/Soy Region Next 2 Weeks to Increase Moisture Drawdown. A lack of rains over the next two weeks initiates stress on early corn/soy development in dryland farms of the N. China Plain (15% of national crop) but heat is not as intense (low to mid 90s). Northeast corn/soy is favorably wet this week.

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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