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Morning Outlook

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Overnight Highlights

<![if !supportLists]>·         <![endif]>The dollar remained strong overnight, near yesterday’s 13-month high, on rising global tensions and expectations of more stimulus for the Euro-zone that would devalue the euro.

<![if !supportLists]>·         <![endif]>The European Central Bank cut interest rates to a new record low minutes ago, unexpectedly lowering borrowing costs to stimulate a stagnating Euro-zone economy. The main refinancing rate is now at just 0.05%, down from 0.15% previously. The ECB indicated that it was worried about deflation.

<![if !supportLists]>·         <![endif]>The dollar spiked to a new 13-month high on the news of the ECB action.

<![if !supportLists]>·         <![endif]>Soybean supplies remain tight ahead of the Midwest harvest, with Decatur, Illinois basis back up to $3.50 above the November contract, while Sioux City, Iowa was at a $3.25 premium.

<![if !supportLists]>·         <![endif]>Corn and soybean futures traded relatively narrow trading ranges in quiet trade overnight just above Wednesday’s new contract lows.

<![if !supportLists]>·         <![endif]>Chicago wheat dropped to new contract lows seeking to be competitive on the global market, while Kansas City and Minneapolis posted modest bounces following Wednesday’s collapse.

<![if !supportLists]>·         <![endif]>Forecasters expect to narrow Midwest shower bands the next two days, with the wettest weather focused on the southern Midwest in the 6- to 10-day period.

<![if !supportLists]>·         <![endif]>The GFS American model has been coolest for late next week. It shifted warmer late Wednesday and overnight, with just spotty frost in the northwest Midwest, but the risk is still considered to be low.

<![if !supportLists]>·         <![endif]>The longer-term outlook shifts wetter in the Delta, but not as wet in the southern Midwest, with only limited frost risks.

Commodity Weather Group Forecast

In the U.S., thundershowers favored central ND, central MN, northwest IL, far southern WI, eastern AL, western GA, and central/northeast NC in the past day, with showers also near the KS/MO and IA/IL borders. However, coverage was very limited for corn/soy as a whole, and a frontal passage in the next 2 days also likely results in fairly narrow bands of showers.

The wettest areas through the weekend will focus from the Gulf Coast into the Southeast, although rains do also expand from the Central Plains into the far southwest Midwest to start next week. This leads into the biggest storm system of the next 2 weeks at the middle of next week, favoring the southern Midwest and northern Delta but leading to only localized flooding.

Rains then diminish again in the 11 to 15 day, with mid to late-month conditions then trending wetter in the Delta and not quite as wet in the southern Midwest on today’s guidance. This will present the greatest chance for harvest slowdowns in AR, TN, KY, southern MO, and near the OH River, but drier conditions will ease any wetness concerns farther north. While the GFS still shows a chance for spotty frost in the northwest Midwest late next week, solutions are not as cold as yesterday, and odds of damage remain very low. Only modest cooling is suggested in the 16 to 30 day period.

In addition to showers in MN/ND, rains favored southern Canada overnight. However, drier conditions aid spring wheat harvest going forward with only minor interruptions in the northern/eastern Canadian Prairies. Frost chances at the middle of next week could impact a small amount of late-maturing canola in the eastern Prairies but is fairly close to normal first frost dates.

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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