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Morning Outlook

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Overnight Highlights

·         The dollar is modestly firmer again this morning, trading near 3-1/2 month highs on ideas that we will see an interest rate hike later this year; possibly as early as September. U.S. stock futures point toward a higher open, with European stocks higher as well after data showed that German factory orders surged 2% in June, beating expectations of a 0.3% rise.

·         Yet, crude oil prices are their lowest since March 20 on a rising supply glut. Weakness in crude oil is proving to be a drag on the broader commodity sector, with the major indices pulling lower this morning.

·         November soybeans are pulling modestly lower this morning after Wednesday’s rally failed to take out the July 30 high of $9.57. Strength comes from some developing dry patches combined with an increase in disease reports. Selling comes from many traders anticipating a large crop. The trade expects USDA to drop its soybean yield by a little more than a bushel next week due to the impact of excessive rain in the southern half of the Midwest in May and June, along with an 800,000 acre reduction in harvested area for soybeans.

·         Wheat futures are seeing follow-through strength as the market shows yet another attempt to carve out a bottom, with the recent price break stimulating increased end user buying. The market has largely priced in a potential record spring wheat crop.

·         Corn prices are modestly higher this morning, garnering strength from wheat and from ideas that corn is well-valued at current levels, but with gains limited by weakness in soybeans this morning. Look for choppy trade ahead of next week’s USDA crop report, which is expected to show about a 2-bushel drop from USDA’s 166.8 bushel per acre yield estimate in July.

·         Showers are expected to linger in the southern Midwest and Tennessee Valley and shift into the Southeast on Friday, with activity also increasing in the northwest Midwest. Additional storms extend from the Central Plains into the central and southeast Midwest by Sunday and Monday (which is wetter than yesterday’s forecast) before a break in many areas for the 6- to 10-day period. Current showers are easing concerns for developing dry spots in central and southern Illinois and Indiana. However, some dry spots remain in northeast Iowa, southwest Wisconsin and northern Illinois. These areas have a chance at showers on Sunday and Monday. Other dryness concerns continue in up to one third of the Delta/Southeast for soybeans.

·         A rain event is expected in the 6- to 10-day period for the heart of the Canadian Prairies to support late canola and wheat growth, but it will not impact earlier losses in the west. Persistent dryness and high temperatures continue to be a problem for corn in southeastern Europe, southern Russia and western Ukraine over the next 10 days. Heavy rains are expected in Argentina over the next 10 days threatening flooding in the eastern third of the wheat belt. Australian wheat sees light showers in southern and western areas the next 10 days, with moisture shortages building in the northeastern third of the belt.

Commodity Weather Group Forecast

In the Midwest/South, rains scattered across the southern/far northwest Midwest and northern Delta in the past day, favoring southern MO, the southern 1/2 of IL, southern IN, south-central OH, central SD, western KY, northern AR, southern TN, and northern MS. Showers linger in the southern Midwest/TN Valley and shift into the Southeast into Friday, with activity also increasing in the northwest Midwest.

Additional thundershowers extend from the C. Plains into the central/southeast Midwest by Sunday/Monday (wetter than yesterday) before a break in many areas for the 6 to 10 day. The current showers are easing any concerns for developing dry spots in central/southern IL and central/southern IN, and the driest areas remain in far northeast IA/southwest WI/northern IL. These areas will have a chance at showers on Sunday/Monday and will need that event to ease concerns, but the area encompasses less than 10% of the Midwest corn/soy.

Showers return to mainly the upper Midwest in the 11 to 15 day and shift into central/southern areas in the 16 to 30 day. Given the lack of heat and the difficulty building any notable dry spots, concerns for Midwest corn/soy should remain limited. The biggest heat/dryness issues will persist in soy areas of TX/LA/southern AR/central MS and possibly SC, encompassing up to 1/3 of the Delta/Southeast.

In the N. Plains/Canada, showers scattered into SD, southwest ND, MT, south-central Saskatchewan, western Manitoba, and central Alberta in the past day. Showers will exit the N. Plains later today but return late in the weekend and again at the middle of the 6 to 10 day to interrupt harvest progress. Another rain event in the 6 to 10 day for the heart of the Canadian Prairies will remain supportive of late canola/wheat growth but will not impact earlier notable losses in the west.

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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