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Morning Outlook

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Overnight Highlights

·         The dollar saw follow-through buying overnight after the U.S. Federal Reserve’s revised monetary policy statement Wednesday appeared to be paving the way for a late-year interest rate hike; the first since 2006. However, movement in the dollar was somewhat refrained until traders see this morning’s initial estimate of second quarter gross domestic product growth. Wall Street expects the data to show 2nd quarter GDP growth of 2.9%, up from negative growth of 0.2% in the first quarter.

·         China’s main composite stock index lost another 2.2% in trading overnight after a sudden break in the final hour of trading. Observers report that the overnight trade was a mirror image of the previous day’s trade when stocks rallied 3.4% in the final hour of trade.

·         Day two of the Northern Plains spring wheat tour produced a yield estimate of 47.3 bushels per acre, down from 48.4 bushels the previous year, but above the three-year average for day two of 45.5 bushels per acre. Day one yielded a record estimate for the first day at 51.1 bushels per acre.

·         August soybeans continued to push higher overnight on good meal demand amid tightening stocks, with prices rising to $9.9475, up 35 cents from Monday’s low. November soybeans followed reluctantly, with traders still worried that a more favorable weather pattern has boosted yield prospects which could leave the United States with a large surplus amid lingering large supplies in South America.

·         Corn futures posted a modest bounce overnight after holding above Wednesday’s lows. Prices were oversold and due for a bounce, but rallies have been difficult to sustain amid talk of “near-perfect weather” and ideas that early-season problems due to persistent rains in the southern half of the Midwest have been fixed. USDA surveyors will be walking fields over the coming week to see the condition of the crop first-hand, while private industry tours of the Midwest will take place on nearly a weekly basis over the coming month.

·         Wheat futures bounced modestly overnight after slicing through key chart support on Wednesday. Fundamental support for wheat remains weak, with a strong U.S. dollar making our wheat expensive on the global market, particularly with some of our quality problems. Furthermore, Black Sea wheat is quoted at cheaper levels than Brazilian corn. Even so, wheat is due for a bounce and has often done so without fundamental support.

·         Intermittent scattered showers are expected in the Upper Midwest from the weekend into Monday, providing the best chance for some needed rain in areas of the northwestern Midwest that have missed out in the past. Showers are otherwise expected to focus farther south in much of the 6- to 15-day period, returning to northwestern areas late in the period. The rains should provide timely moisture for shallow-rooted crops in the eastern Midwest.

·         A brief surge of mid-90s°F heat into Missouri is expected on Monday, but notable heat is otherwise limited to Kansas and to the Delta, but even these areas will see periodic breaks in the heat. Readings otherwise remain favorable for corn grain fill and soybean pod development. The 16- to 30-day outlook is less cool for the Midwest, but also trended wetter.

·         Mostly dry conditions returned to the Canadian Prairies Wednesday after recent beneficial rains, with rain chances increasing again for the 11- to 15-day period. Additional stress is limited to just 10% of the Prairies, although much of the previous damage is unrecoverable. Light rains this week were not enough to avert a return of heat stress for European corn next week. Rains remain active for China corn and soybean areas over the next week. Widespread rains are underway in Western Australia wheat areas.

Commodity Weather Group Forecast

In the Midwest/South, showers were patchy but well-placed, reaching parts of south-central KS, eastern MI, western OH, and central/southwest KY. Intermittent scattered showers occur in the upper Midwest from the weekend into Monday, offering the best chance for some needed rain in far northeast IA/far northwest IL/southwest WI.

Showers otherwise focus farther south in much of the 6 to 15 day, returning to the northwest Midwest late in the period. The expected rains will aid shallow-rooted crop areas of IL/IN/OH, limiting concerns for corn/soy growth. With the exception of a brief incursion of mid 90s into MO on Monday, notable heat is limited to the Delta/KS, and even these areas will see some breaks in the heat at times. This will also aid late corn development and soy pod development in the belt.

The Euro guidance flipped much cooler in the Midwest and wetter in the Delta in the 6 to 10 day, but our forecast still sides with the more consistent ensembles and limits rain chances to mainly the TN Valley. The ongoing heat/dryness elsewhere in the Delta soy will allow stress to gradually build in AR/MS/LA (over 1/3 of the belt) in the next 2 weeks. The 16 to 30 day remains warm/dry in the Delta, while the Midwest was not as cool but also trended wetter.

In the N. Plains/Canada, mostly dry conditions returned yesterday after the recent beneficial moisture. 11 to 15 day rain chances have increased for Canada, and additional stress is limited to 10% of wheat/canola. However, earlier notable losses will not be recovered. Early harvest slowdowns are limited for the N. Plains in the first 1/2 of August, but the western 1/2 of the belt may see progress slow in the 16 to 30 day.

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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