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Morning Outlook

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Overnight Highlights

·         Greece’s parliament begins debate on reforms needed to unlock the aid it needs to stay afloat and remain in the Eurozone. Greek banks need an influx of cash before they can open for the first time in two weeks, but the European Central Bank is waiting to do so until it sees if Greece’s parliament passes necessary reforms by midnight tonight local time.

·         China’s gross domestic product rose by 7% in the second quarter, beating analysts’ expectations of 6.8%. The data raises optimism that Chinese stimulus efforts are working. Ironically, the sell-off was on again overnight in the Chinese stock market, with the main Shanghai Composite Index down another 3%.

·         China, the world’s top producer and consumer of pork, produced 25.74 million metric tons of meat in the first half of 2015, down 4.9% from the previous year, following a sharp reduction in the sow herd due to high feed costs. This is expected to have an impact on demand for soymeal, dried distillers grains and solubles and feed grains over the coming year.

·         Crude oil prices are lower this morning on fears that Iran will soon be dumping more oil on the world supply glut following the Iranian nuclear deal reached this week. Weakness in crude oil is indicative of broader weakness in the commodity sector on a modestly higher U.S. dollar.

·         Corn is modestly lower this morning, slipping lower in follow-through selling following yesterday’s bearish reversal on the charts as weather forecasts improve for many wet areas of the Midwest. It’s difficult to keep fund managers focused on the problems with the crop with USDA’s weekly crop ratings remain above average for this time of year; something which isn’t unusual for wet years.

·         Soybeans added to losses as well overnight, following through on late-day weakness from Tuesday’s trading session amid above-average crop ratings for this time of year. Traders point toward August as being the critical month for the crop.

·         Wheat extended losses to 2-1/2 week lows on poor demand for “high-priced” U.S. supplies on the global market as harvest progress gains momentum.

·         Heat stress during pollination is likely hurting yields in Kansas and Nebraska, but that stress is expected to ease next week. Rains are expected to aid corn and soybeans in drier western areas of the Midwest over the next two weeks, with easing pressure on persistently wet areas of the east.

·         Some showers are expected in southwestern Europe this weekend, but they will likely be too limited to offset heat stress for pollinating corn.

·         Forecast models are still trending slightly wetter for India soybeans and groundnuts next week.

·         Rains are expected to benefit southern and eastern Australian wheat next week. Showers in the western third of the belt are expected to be light, but provide some help for stressed crops early in the spring growth cycle.

Commodity Weather Group Forecast

In the Midwest/South, rains fell in OH, KY, TN, and NE AR yesterday while overnight rains benefit S. NE/W. KS after another day of mid-90s to lower 100s. Showers expand across the W. Midwest next 2 days and scatter into the eastern belt by the weekend. Additional rains in the west are expected late weekend as a cold front pushes into the area. The timely rains in the west boost low soil moisture to benefit corn pollination/soy blooming with only SD on the light side of rains.

Eastern Midwest rains still lead to spots of excess moisture but are much more limited and with drier trends in 11-15 day should lead to further recovery from excess wetness. Highs in the mid-90s to mid-100s next weekend in the W. 1/4 of the Midwest look short lived but could still stress KS/NE corn pollination. The rest of the Midwest corn pollination should be aided by a lack of heat much of next week in the wake of the cold front.

Rains in the Southeast are still scant enough in GA and S. SC this week to lead to some spotty stress but an upturn in showers later next week avert yield loss for most soy/cotton. Delta dryness over next 2 weeks will draw down soil moisture and could begin to lead to stress on cotton/soy areas mainly in EC AR/NW MS.

In the Plains/Canada, rains in W. KS and S. NE overnight will slow wheat harvest but drier conditions now through the weekend should ease concerns for harvest delays. Can. Prairies rains were widely scattered in C. Alberta and S. Saskatchewan yesterday. Rains favor N. & E. areas this week, but SW 1/3 of belt could see some showers next week further ease stress with ongoing stress in Saskatchewan canola. Weekend rains benefit much of the N. Plains spring wheat 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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