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Morning Outlook

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Overnight Highlights

·         Greek Prime Minister Tsipras returns to face parliament today for yet another vote needed to approve reforms in order to qualify for a third bailout. He’ll need to get votes from his opposition party to get it past. The European Central Bank will also decide today whether to race the cap on Emergency Liquidity Assistance for Greek banks to keep them open.

·         However, the bigger news overnight impacting grain and oilseed prices was a broad sell-off of the equity and commodity markets. A miss on iPhone sales and shipments in yesterday afternoon’s earnings report triggered a broad sell-off in the tech sector that weighed on the broader stocks as well.

·         Meanwhile, Wall Street continues to talk about the slide in global commodity values on fears that a contracting global economy is damaging demand prospects for commodities. Such talk is becoming self-fulfilling prophecy, with fund managers selling the broader sector once again this morning, amplifying losses in the grain and oilseed sector.

·         The dollar is up very modestly this morning, but the sell-off in the commodity sector continues. Often times the bottom comes when everyone is most bearish, but the timing can be tricky and catching a falling knife can be painful and is not recommended. In the meantime, the broader commodity bearishness will likely make rallies tough to sustain in the grains, while amplifying losses in down days.

·         The first day of an industry tour of the Canadian Prairies crop belt Tuesday revealed that spring wheat in southeastern Alberta is short and thin, revealing more damage than expected from this year’s hot dry weather. The region has suffered under the strongest drought in decades, reducing production potential, especially in southwestern areas. Participants will continue with day two of the three day tour today. The concerns have limited losses for Minneapolis wheat, but U.S. wheat prices overall continue to slide on weak demand.

·         Corn and soybean prices dropped overnight on what some in the trade are now calling “ideal” weather for this year’s crop. Perspective change quickly as the intensity of rains ease in the southern Midwest, allowing traders to forget the problems in saturated areas. This is typical of wet years as we move through July into early August, particularly since crop ratings tend to remain relatively high.

·         Showers are expected to remain more limited across saturated areas of the eastern Midwest over the next two weeks, with the best chances for a few showers being this weekend and again in the 11- to 15-day period. Meanwhile, rains are expected to favor Nebraska and Iowa crops most frequently over the next couple weeks, but also to fill in across much of the rest of the central and southwestern belt in the 6- to 15-day period.

·         Heat is expected to remain limited across the Midwest over the next couple weeks, with peaks into the mid-90s as far north and east as Missouri on Friday/Saturday and Monday/Tuesday.

·         Rains are more likely early next week in Canada and should narrow dry spots to limit additional crop losses after a very poor start to the season.

·         Showers and cooler temperatures are expected to ease corn stress in eastern Europe by the weekend, with heat in southern Russia looking short-lived.

·         Oilseed crops in India are expected to continue to benefit from a more active monsoon through next week.

·         Rains over the next week are expected to break a dry spell over northeastern China.

·         Rain potential remains limited over dry areas of western Australia over the next 10 days, hampering early spring growth of wheat.

Commodity Weather Group Forecast

In the Midwest/South, scattered thundershowers favored northern AR, far southwest TN, east-central NC, and central SD in the past day. Showers remain more limited in the next 2 weeks to ease wet spots in OH/IN, with the best chances for a few showers this weekend and in the 11 to 15 day. Rains will favor NE/IA corn/soy growth most frequently over the next 2 weeks but will also fill in across much of the rest of the central/southwest belt in the 6 to 15 day, while rain chances are a bit more limited for mainly SD and southern MN in today’s outlook and could leave some drier spots.

However, heat is still limited, with peaks on Friday/Saturday and Monday/Tuesday leading to mid-90s only reaching as far north/east as MO. The lack of more notable heat will keep crop development favorable in all but far southwest sections of the belt. Rains continue to aid the northern Delta/Southeast in the near-term, with additional chances in the 6 to 15 day. This should limit dryness/heat concerns for building stress to mainly southern AR, southwest MS, and LA (1/3 of Delta soy) in the next few weeks. The 16 to 30 day remains mild/showery in much of the Midwest, with driest conditions in the Deep South, Dakotas, and MN.

In the Plains/Canada, a few showers occurred in northern Alberta in the past day, with scattered storms in the southern/western Plains. Rains are more likely early next week in Canada and should further narrow dry spots to limit additional wheat/canola losses after the very poor start to the season.

Maturing spring wheat in the N. Plains should see stable conditions, with the final winter wheat harvest in the C. Plains pushing to completion in between showers.

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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