Morning Outlook

Overnight Highlights

·         Stock futures suggest big gains on optimism of an agreement with Greece tomorrow when European leaders meet in Brussels.

·         Greece is expected to propose a six-month extension to keep it funded that would honor 70% of the current agreement terms, while negotiating the other 30%.

·         Bond and equity traders reacted positively, but currency traders were not impressed. The dollar was stronger as the euro weakened ahead of tomorrow’s meetings, which are expected to be contentious with European leaders playing hard ball with Greece.

·         The stronger dollar saw commodity prices drop overnight, including modest losses for grain and oilseed prices.

·         The Baltic Exchange index of ocean freight rates fell to a record low (1985) on declining global cargo demand, especially from China as the world’s economy slows.

·         USDA will update its domestic and global supply and demand balance sheets at 11 a.m. CST this morning. The primary focus will be on South American production estimates seen below.

·         Australia raised its 2014 wheat production estimate to 23.61 million metric tons on better than expected yields, up from 23.22 mmt previously. USDA is already at 24 mmt.

·         Russian wheat prices continue to rise despite export curbs, contributing to food inflation, as farmers refuse to sell amid a declining ruble.

·         Pre-report estimates are as follows for later today:

Commodity Weather Group Forecast

In the U.S., showers lingered in the Pacific Northwest wheat belt (.10 to .50”), with more significant showers (.25 to 1.5”) in the Southeast yesterday. Light snow is likely in the Midwest (1 to 3”) this week ahead of the main cold push on Sunday. While readings will reach winterkill levels in the northeast 1/3 of the Midwest, wheat should be protected by snow cover.

The Delta has rain chances in both the 6 to 10 and 11 to 15 day that should begin to ease pronounced winter dryness. Shower chances are minimal in the Plains wheat belt for the next 2 weeks, with main concerns for spring growth centered on OK.

In South America, scattered showers favored central/western Sao Paulo, northeast Mato Grosso do Sul, central/southeast Mato Grosso, far northeast Goias, northern/eastern Espirito Santo, and patchy sections of Minas Gerais in Brazil yesterday. This did offer additional follow-up moisture to coffee/sugar areas, and the extended outlook has also trended wetter.

Our outlook would still be sufficient to limit stress in all but the northern 1/4 of the coffee belt, and guidance is actually faster and heavier with these rains. Southern soy areas will benefit from rains this week, while more limited rains in the northwest will aid soy harvest and safrinha corn seeding this week before some interruptions return next week. The 16 to 30 day still suggests improving fieldwork conditions for the northwest, particularly later in the period.

Argentina picked up significant rains in north-central Buenos Aires, much of Cordoba, and northern/far southwest Santa Fe yesterday, aiding corn/soy growth. The driest conditions over the next few weeks should be in the east, although southeast Santa Fe and Entre Rios still have abundant subsoil moisture. This should limit any developing concerns to no more than 15% of the belt for now.

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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