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Morning Outlook

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Overnight Highlights

·         Chinese stocks continued to tumble overnight, with the Shanghai Composite Index falling another 6%. Trade was halted for 72% of the listed companies to limit the selling. Selling spread around the world to other equity markets, with U.S. stock futures suggesting triple digit losses for the Dow Jones Industrial Average at the open. The spreading selling raises increased concerns about global economic growth and demand for the broader commodity sector.

·         Talks with Greece broke up with E.U. members lecturing Greece about its juvenile behavior and showing Greek leaders the door. Sources close to the talks indicate that European leaders shared their frustration with Greek Prime Minister Tsipras, essentially inviting him to leave the European Union. The shift in sentiment seemed to ease fears about the future, allowing the euro to bounce and the dollar to correct lower overnight.

·         Bloomberg reports that European leaders gave Greece until Sunday to accept rescue terms or get thrown out of the European Union. The currency markets appear to be expressing relief that the saga may finally be near an end for the European Union, although Greece’s problems may be just beginning. Look for Greece to now look to Russia for assistance.

·         The weaker dollar is encouraging some money flow back into the broader commodity sector, with crude oil leading the way. Soybeans are rallying over the past hour after approaching a 50% retracement of its recent surge in prices.

·         Wheat prices remain under pressure after An Egyptian tender to buy wheat for mid-August delivery revealed that U.S. prices were more than $1.30 per bushel over the low bids. Black Sea wheat continues to be the low-priced wheat on the world market, but some uncertainty leaves Russian bids in question. Exporters expected Russia’s new export tariff formula to tax the wheat at less than $1 per ton at current price levels, but customs officials are trying to charge between $7 and $30 per ton.

·         Traders are beginning to position for Friday morning’s USDA monthly crop report. USDA is expected to incorporate its stocks and acreage data from June 30 into its balance sheet, but the real focus will be on whether the agency adjusts its corn and soybean yields; something it has been reluctant to do in past July reports.

·         Rains are again soaking Missouri and surrounding areas of the southwestern Midwest this morning. Showers are expected to favor southern and eastern portions of the Midwest this week, shifting to northern and eastern areas in the 6- to 15-day period.

·         Forecast models are warming up for the Midwest in the 6- to 15-day period, but that means mostly 80s and low-90s F.

·         Forecasts are slightly drier again next week in the Canadian Prairies, with southwestern areas driest keeping up to 50% of the wheat and canola under stress.

·         A heat dome is expected to continue to stress European crops over the next 10 days, with greatest concerns now focused on corn in France.

·         Timely rains are expected to ease dryness concerns in southeastern Australia by the weekend, but moisture shortages are expected to redevelop in western areas.

Commodity Weather Group Forecast

In the Midwest/South, thundershowers stretched from the far northern Delta into the eastern/far southern Midwest in the past day, favoring parts of far southern IL, central/southern IN, central OH, northern/western KY, far northwest TN, and the MO/AR border.

Rains favor the southern Midwest in the next 2 days and shift into the central/northeast to finish the week, with the best chance for locally up to 5” in parts of OH/IN. Rains favor the northern/eastern Midwest in the 6 to 15 day, aiding moisture in the upper Midwest for corn pollination. Wetness should ease in MO/IL next week, although the 11 to 15 day is slightly wetter. IN/OH are likely to see regular rains limit much drying, and low-lying fields/river bottoms remain most prone to wetness issues.

The 6 to 15 day did trend warmer, but most of the corn belt peaks in the mid-80s to low 90s. More notable heat is limited to KS and perhaps a few spots in NE (10% or less of Midwest), with a few drier patches there as well. The Delta turns warmer/drier in the wake of recent heavy rains, while 11 to 15 day showers are expected to aid the Southeast. The 16 to 30 day remains near normal for Midwest rains/temperatures, with driest conditions to the south. However, risks are warmer/drier for the Midwest on some guidance.

In the Plains/Canada, thundershowers favored central ND, central/northeast OK, and central TX in the past day. A slightly wetter outlook in KS and West TX will slow late wheat harvest late this week, but interruptions are otherwise limited in the next 2 weeks. Guidance is not as wet next week in Canada and is closer to our forecast, with the southwest 1/2 of the wheat/canola at most risk for ongoing stress and yield loss in the next 2 weeks.

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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