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Morning Outlook

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Overnight Highlights

·         The markets are reacting positively to a last minute proposal from Greece. Sources close to the negotiations indicate that Greece’s proposal includes most but not all of the factors that voters rejected on Sunday. That increases the odds of an agreement, but does not guarantee it. It must receive approval from Greece’s parliament today. If it gets approval there, it must then be approved by European Union leaders.

·         China’s Shanghai Composite index climbed another 4.5% overnight to reach its largest two-day gain since 2008. It’s amazing what a market can do when the government restricts the ability of traders to sell. Regardless, it eased fears for now.

·         The euro surged on the Greek developments, even though analysts questioned Greece’s ability to live up to the agreement that would simply add to the debt owed to its creditors. The dollar is down more than 1,000 points on the stronger euro and calmer Chinese markets, resulting in a resurgence of money flow back into the broader commodity markets.

·         This frees grain and oilseed traders to focus on today’s USDA crop report, due out at 11 a.m. CDT. Corn and soybean prices are building modestly on yesterday’s gains on expectations that USDA will tighten its balance sheet by reducing yields today due to excessive rains in the southern half of the Midwest. Wheat prices are gaining on global weather problems. Gains in all three commodities are being amplified by a surge of money flow into the broader commodity indices of which they are a part.

·         Thundershowers scatter across the southeastern Midwest today, before focusing on western areas this weekend and then eastern areas again on Sunday and Monday. Temperatures push into the low- to mid-90s in the southwestern half of the belt in the first half of next week, ushering in a drier pattern. However, a push of cooler air then sets off another round of showers across the belt in the second half of next week, adding to wetness concerns for Illinois, Indiana and Ohio once again.

·         Rains early next week could ease stress in the northern and eastern quarters of the Canadian Prairies. However, rains in the 6- to 15-day period remain more limited and could be accompanied with a surge of heat in the 90s and lower 100s F, adding to stress in the dry areas. A study by Commodity Weather Group indicates that the weather pattern could reduce wheat and canola yields by 20% or more.

·         Showers benefit Romanian corn overnight. Dryness over France and Spain over the next 10 days stress dryland crops. French corn this week was 18% pollinated, up from 1% the previous week. The crop was rated 71% Good to Excellent, but that was down 10 points from the previous week.

·         Rains are expected to increase for southern and eastern Australia over the next 10 days, while dryness concerns are expected to grow for the western third of the wheat belt.

Commodity Weather Group Forecast

In the Midwest/South, thundershowers were confined to the southern fringes of the Midwest yesterday with most significant rains in S. MO where soy planting and wheat harvest were most advanced. Thundershowers scatter across the southeastern Midwest today with the main activity this weekend in W. Midwest but scattering back into the eastern belt Sunday/Monday.

Showers are more limited the first half of next week as temperatures warm up with highs peaking in the low to mid-90s in the SW 1/2 of the belt but just 80s NE 1/2. Cooling the latter half of next week sets off another rounds of showers across the belt, keeping wetness concerns for low-lying fields in IL/IN/OH while wetness concerns are likely to fade for MO. The brief heat should not harm corn pollination as it peaks over the next two weeks with greatest risk for heat confined to KS and S. MO.

Rains expand into the Southeast in the 6 to 15 day to aid corn/soy/cotton, but likely miss all but the NE Delta reducing moisture supplies gradually in the wake of recent abundant rains which could lead to some dryness concerns for cotton/soy in the 16 to 30 day but is too late to harm most corn. Mostly seasonable temperatures in 16-30 day aid late corn pollination.

In the Plains/Canada, rains favored TX/OK panhandles yesterday. Rains increase early next week in Canada which could ease stress particularly in N. & E. 1/4’s of the belt but rains in the 6-15 day remain more limited and there could be a stronger surge of heat next week as well with 90s to lower 100s stressing dry areas. Plains wheat harvest interruptions are minimal next 2 weeks while only the W. 1/4 of the N. Plains spring wheat may see moisture shortages hamper filling.

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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