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Morning Outlook

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Overnight Highlights

·         Greece’s new leadership withdraws demand for writing down debt, but continues to argue for increased spending and a roll back on austerity.

·         Australia joined the growing chorus of central banks cutting interest rates, sending its currency down as much as 2.3% relative to the U.S. dollar overnight.

·         Money flowed into a broad spectrum of hard assets overnight, with commodity and equity prices rising.

·         Grain and oilseed prices benefited from the broad-spectrum strength. However, prices generally remained below the previous day’s highs and there has been a tendency for overnight strength to dissipate in the grains in recent days.

·         A private crop tour pegged Brazil’s soybean crop at 93.2 mmt, down from 96.1 mmt previously and down from USDA’s latest estimate of 95.5 mmt after heat and dryness took the top off the crop in January. However, that is still up from last year’s record 86.7 mmt.

·         Egypt tendered to buy wheat following yesterday’s big drop in prices, spurring bottom-picking buying in the food grain overnight.

·         Japan, South Korea, Jordon and Iraq have also tendered to buy wheat on the latest price break, suggesting that buyers see value at current levels.

·         Brazil rains in the next week are expected to reduce but not eliminate dry areas.

·         The risk of excessive rains in Argentina the next two weeks are limited.

·         The Midwest is likely to pick up more snow cover next week.

Commodity Weather Group Forecast

In the U.S., showers (.25 to .75”) were confined to the Carolinas yesterday. Showers this week will focus on the Pacific Northwest, benefiting wheat areas that still have limited soil moisture supplies. The Midwest is still in line for more snow this week ahead of sub-0°F readings later this week. This should ensure damage is minimal.

Additional snow looks likely next weekend as well, further enhancing crop protection. Showers remain possible in the Delta and S. Plains in the 11 to 15 day and would provide more beneficial moisture to ease soil moisture deficits that persist across these areas.

In South America, patchy showers in Brazil occurred in mainly north-central Mato Grosso, northwest/southeast fringes of Goias, central/southeast Minas Gerais, western Parana, and southern Mato Grosso do Sul yesterday. Rains should expand to some extent from mid-week through early next week in northern Brazil, with the best chance in central areas Wednesday/Thursday.

Models remain quite aggressive, but our forecast still scales back totals quite a bit given recent wet biases in the guidance. This should still allow plenty of moisture into coffee/sugar areas to ease stress for now, and the current forecast would scale driest soy areas back to 15 or 20% of the belt. Patchy sections of central Parana, southern Mato Grosso, and northwest MGDS may be least favored for rain, but the lack of wetter weather will also aid early soy harvest in the Mato Grossos.

Argentina rains favored southeast Santiago del Estero, northwest Cordoba, and far northern Santa Fe yesterday. Scattered showers linger through mid-week in the north/west and then favor the south in the 6 to 10 day and shift north/east in the 11 to 15 day. While an active pattern, the risk of excess rain is limited, and corn/soy yield potential should remain high.

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

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