Morning Outlook

Overnight Highlights

·         The euro rallied and dollar dropped more than 800 points to three-week lows overnight on renewed optimism as Greek Prime Minister Tsipras prepared to meet other European leaders to discuss the current impasse over its debt problems. However, the dollar has rallied to erase most of those losses this morning.

·         Crude oil rallied to four-week highs overnight after the Energy Information Administration raised its demand outlook, amid expectations that the Department of Energy will show declining stocks later this morning.

·         Japan’s Weather Bureau warned overnight of a possible strong El Nino of long duration, threatening global crop production with adverse weather patterns.

·         Temperatures reaching the 90s in the western Midwest yesterday should ease over the next two days, with a hotter risk to the South next week.

·         Extensive rains over the next 10 days are expected to aid Midwest moisture, but slow soybean seeding in the southwestern belt.

·         Rains favor the far northern Canadian Prairies over the next five days, followed by western and far southern areas next week.

·         Rains are expected to aid western European wheat over the next week, but just limited relief is seen in dry northeastern areas.

·         Grain and oilseed prices pushed modestly higher overnight as traders complete positioning for this morning’s 11 a.m. CDT USDA crop report. Trade expectations are as follows:

Commodity Weather Group Forecast

In the Midwest/South, scattered thundershowers occurred in northern/southeast LA, southern MS, eastern AL, central/far southwest GA, southeast/far northern SC, southeast NC, east-central SD, and southwest MN in the past day. Highs were well into the 90s in SD, southwest MN, NE, KS, and central/western IA, yesterday.

Heat moderates in the next 2 days, with extensive Midwest coverage and pockets of excess moisture from Thursday through Wednesday. Rains then favor the northwest Midwest into the 11 to 15 day. The moisture will aid corn/soy growth, but the rains will keep late soy seeding quite a struggle through the next 10 days in KS/MO. There is a risk for low to mid 90s into the southern Midwest/Delta next week that would exceed current expectations, but crop stress should still be limited to pollinating corn in mainly GA/SC (mid 90s to low 100s in the 6 to 15 day). The 16 to 30 day remains mild/showery in the Midwest and warmer/drier to the south.

In the Plains/Canada, thundershowers favored central MT in the past day. Rains increase tonight through early next week for Plains winter wheat areas, stalling early harvest in the south and threatening minor lodging damage in western OK, West TX, and southern/eastern KS. More limited showers then occur in the balance of the 15-day period to aid fieldwork.

Extensive 6 to 15 day rains will aid N. Plains spring wheat. Showers will favor the northern Canadian Prairies late Thursday into the weekend and the west/far south next week. This will provide some minor relief to the driest areas in Alberta/western Saskatchewan, but warmer/drier expectations remain for the 16 to 30 day across the Prairies that would still threaten yield loss.

Europe Wheat Rain Potential More Limited Northeast, But Heat Spike is Brief. Extensive rains in the next week aid wheat in France and U.K. to improve moisture supplies. Germany and Poland see scattered showers early next week end 2 to 3 days of 90s but will not be enough to eradicate moisture shortages.

Ukraine Likely to See Timely Rains Ease Dryness; Russian Rains Limited, Heat Focused in Volga. Showers expand across Ukraine in the next 2 weeks keeping wheat/corn stable but struggling to reach into Volga and northern parts of South Russia. Most of FSU only sees 90s briefly, but Volga could be hot for much of next 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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