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Sunday Outlook

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Weekend Developments

<![if !supportLists]>·         <![endif]>Traders put some risk premium into corn and soybean prices ahead of the weekend on the chance that forecasts for next weekend could turn colder for the northwestern Midwest.

<![if !supportLists]>·         <![endif]>Forecast models show a bit less risk for freeze damage today than they did on Friday.

<![if !supportLists]>·         <![endif]>The northwestern Midwest freeze damage risk is low for Saturday, with the coldest models less aggressive.

<![if !supportLists]>·         <![endif]>Some cloud cover and wind is expected for reducing the risk of pooling cold air in the region.

<![if !supportLists]>·         <![endif]>Significant rains are expected for the Midwest mid-week, but then the outlook turns drier through mid-September for the corn/soybean belt.

<![if !supportLists]>·         <![endif]>USDA will update its corn/soybean production estimates Thursday morning, while revising its supply and demand balance sheets.

<![if !supportLists]>·         <![endif]>A Bloomberg survey of trade participants revealed expectations for USDA to peg the corn crop at 170.7 bushels per acre, with soybeans at 46.3 bushels.

<![if !supportLists]>·         <![endif]>My yield models are currently at 172.7 and 48.0 bushels per acre respectively for corn and soybeans, but USDA isn’t expected to go that high in this report.

<![if !supportLists]>·         <![endif]>Historically, USDA tended to make very small upward revisions to its yield estimates in its September report in big crop years, with much bigger gains in October and November.

<![if !supportLists]>·         <![endif]>The Bloomberg survey revealed expectations that USDA will peg corn ending stocks at 1.995 billion bushels, with soybeans at 461 million bushels. Our submitted estimates were 2.001 billion and 495 million bushels respectively.  

<![if !supportLists]>·         <![endif]>Updated forecast models for next weekend’s cold and Thursday’s USDA crop report are expected to be the primary focus for traders this week.

<![if !supportLists]>·         <![endif]>There are signs tonight that the Ukrainian cease-fire is beginning to crumble, with an escalation of sanctions and counter-sanctions expected this week if that is the case.

Commodity Weather Group Weekend Summary

In the U.S., scattered storms early in the weekend favored parts of West TX, central/southwest OK, far southeast KS, central MO, central IL, northern IN, far northern OH, and far eastern/southwest MI, although spotty showers were noted throughout the Deep South and in the foothills of the Rockies in the past 2 days as well.

A storm system will be enhanced by tropical remnants from a Pacific storm that get pulled out of the Southwest at mid-week, bringing locally heavy rainfall (4 to 6” or more) to sections of far eastern NE, IA, and around the Great Lakes (mostly Tuesday/Wednesday). However, showers then become much more limited for the Midwest during the balance of the 15-day period, preventing any serious wetness worries.

Showers will occur in parts of the Delta Thursday/Friday and again in the 11 to 15 day. However, CFS guidance has been trending closer to normal for southern harvest areas in the 16 to 30 day and suggests limited harvest threats.

The overall risk of hard freeze damage (upper 20s) remains low (and a bit less than Friday) in the northwest Midwest corn/soy late this week. Frost (lows near 30 F) is most likely in far northeast IA, MN, and western WI on Saturday morning. Guidance occasionally shows another cold shot early next week, but this is even less supported by ensembles.

While showers will be limited to mostly light activity at mid-week in spring wheat areas, much cooler air returns in the next 10 days after the brief weekend warming and will slow drying in the wettest fields near the Canadian border to keep harvest a bit sluggish.

Frost is most likely in the northern/western Canadian Prairies this week, rather than late-maturing eastern canola areas that would still be a bit vulnerable. Showers will continue to aid winter wheat moisture to the south in the Plains, and weekend rains also aided late West TX cotton growth.

FSU Wheat to See Showers in S. Russia This Week Ease (But Not Eliminate) Moisture Stress. Rains could improve planting for about 1/2 of the dry area, but a drier pattern returns in the 6 to 15 day.

 

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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