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Sunday Outlook

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Weekend Developments

·         Friday’s option expiration weighed on corn & soybean prices to close out the week, but both have struggled to sustain downside moves.

·         We turn the calendar to March next week, which is when the market begins to worry about things that could risk acreage and/or yields.

·         December corn should take a larger leadership role in the days and weeks ahead, attempting to get the acres needed to as a safety margin against possible weather risks this summer.

·         November soybeans may do the same until/unless private estimates over the next few weeks help traders forget about USDA’s small acreage estimate from Friday. Soybeans are bearish long-term once questions about acreage/yield are answered, short of a significant weather problem.

·         Wheat finished the week poorly, but should find support in Chicago at $5. It’s vulnerable if it doesn’t, but otherwise I look for it to begin adding risk premium as we move into March.

·         All grains will continue to monitor developments in the currency markets, which are significantly impacting money flow both in and out of the broader commodity sector. The dollar is higher and crude oil lower in early trade this evening, which is a negative factor for grains to open trade tonight.

·         Weekend rains favored much of Mato Grosso (6X the size of Illinois), with locally 3 to 6” seen, which is supportive for corn and soybean prices. Showers diminish in northern areas to allow soybean harvest and safrinha corn planting, but rains are now expected to return by Thursday, bringing a halt to field work once again.

·         Corn seeding in Mato Grosso is estimated at 40% complete, or about a week behind schedule, raising the need for good rains in late April when the dry season often begins.

·         A truckers strike in Brazil is slowing movement of soybeans to the port, along with rain delays, which is expected to further extend the U.S. export season, supporting nearby contracts.

·         Traders may be wary of building ownership in the so-called riskier asset classes near-term after a terror group released a video over the weekend threatening the Mall of America in Minnesota.

·         Greece’s government has until the end of the day on Monday develop the policies needed to comply with a four-month aid extension granted on Friday.

·         Dockworkers and management settled a labor dispute on the West Coast late Friday, but it will take months to clear the backlog of products trying to move through the ports.

Commodity Weather Group Weekend Summary

In the U.S., snow (2 to 6”, locally 12”) fell across the central 1/2 of the Midwest and northwest 1/4 of the Plains wheat belt this weekend. This added protection for much of the wheat in the Midwest, with winterkill threats from strong cold pushes this week confined to a small strip in northern parts of IL/IN (no more than 10% of the soft red wheat).

Rains of .50 to 2” (locally 4”) covered the Delta this weekend, easing soil moisture deficits. The Delta will see snow/ice/rain today, but damage is not expected. Additional significant 6 to 15 day rains are likely, but excessive moisture is likely to remain isolated. Southeast wheat remains on the light side of most rains in the next 2 weeks, but soil moisture reserves are adequate. Plains wheat will not be cold enough for winterkill and should see beneficial snow in the southwest 1/2 of the belt today and in much of area in the 6 to 15 day.

In South America, weekend rains favored much of Mato Grosso (locally 3 to 6”), western Goias, central/far eastern Bahia, and far northern Rio Grande do Sul but also scattered into parts of central Brazil. Showers diminish in northern areas through mid-week, but interruptions now resume for soy harvest and safrinha corn seeding in the northwest by Thursday and continue into the early 11 to 15 day. Mato Grosso corn seeding is currently 40% complete and a week behind normal.

Late-season showers will be critical in April to prevent losses in the late-planted areas. 6 to 10 day rains will provide welcome moisture to coffee/sugar areas, while central port areas will be wettest from late this week into the 6 to 10 day. Expected rains into Tuesday and again Friday in RGDS will be important to aid recent drier soy areas.

Argentina will pick up locally heavy rain late Tuesday/Wednesday, with another fairly widespread event at the end of the 10-day. This should keep dry spots very limited in the south, although some localized excess rain is possible in Cordoba and northern/western Santa Fe.

 

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

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