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Morning Outlook

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Overnight Highlights

·         Ukraine is requesting “special partner” status from NATO while it proceeds with its membership application.

·         Thursday’s sell-off erased $320 billion of value from the U.S. equity markets, but there are few signs of panic this morning, with Wall Street treating the losses as a normal market correction.

·         The dollar is higher again this morning, near yesterday’s four-year highs, as fears rise that the European Central Bank’s efforts to stimulate the region’s economy may not be enough to keep the Euro-zone out of another recession.

·         The stronger dollar is expected to encourage continued selling of the broader commodity sector, accelerating losses in corn and soybeans, which are facing their own seasonal weakness due to a big harvest.

·         Corn consolidated in a very narrow trading range just above contract lows overnight.

·         Soybeans dropped to new contract lows amid crumbling basis as harvest advances northward.

·         Wheat consolidated lower just above recent lows amid a strong dollar, increased global competition and weakness in the broader commodity sector.

·         Another five days of favorable harvest weather is expected in the Midwest before rains arrive late next week.

·         Showers benefit western Australian wheat, while dry spots linger in a quarter of the belt in eastern areas.

Commodity Weather Group Forecast

In the U.S., showers were minimal in all crop areas yesterday. Midwest corn/soy harvest will make good progress over the next 5 days, until showers scatter across the region during the latter 1/2 of next week. This will slow progress but should not be enough to stall harvest, and damage potential is minor. 11 to 15 day rains still look too light to significantly impede harvest.

The latest GFS has a freeze in the northwest Midwest late next week, but confidence is minimal as most models are not as cold.

Cotton/soy harvest disruptions by showers in the South next week look much more limited, and damage concerns for the Carolinas have been reduced. Plains wheat still likely sees showers next week, but more limited rain in OK could still hamper germination (no more than 15% of the belt). Canadian spring wheat/canola harvest is favorable in the next 2 weeks.

In South America, widely scattered thundershowers again occurred in Mato Grosso yesterday, but favored areas were in south-central Sao Paulo and northern/western Parana (locally 2 to 4”), with good coverage also noted farther south in Brazil.

Our outlook remains for about 1/3 of Brazil coffee to see sufficient rain to support flowering next week, although the 6 to 15 day GFS guidance is still much more generous than the preferred Euro model. The CFS (wetter) and Euro (drier) guidance are also split in the 16 to 30 day.

Quality concerns and localized losses remain a threat to Brazil wheat in the near-term (locally 4 to 8” totals), although the 6 to 10 day offers a brief downturn. Rains next week should continue to improve early prospects for corn/soy in northwest Brazil, and crop conditions will remain mostly stable for Argentine corn/wheat.

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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