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Morning Outlook

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Overnight Highlights

·         Data released overnight revealed that China’s manufacturing sector contracted slightly in April, leading to speculation by traders that its central bank will inject more stimulus into its economy.

·         Greece remains on the front burner in Europe and in the currency markets on fears that it will default on its steady stream of debt obligations.

·         The dollar traded modestly higher along with crude oil overnight.

·         Soybean prices firmed on bargain-hunter buying after falling to two week lows on Friday. There has also been some chatter about fresh Chinese buying, but that’s not likely to appreciably alter the balance sheet amid a large carryover.

·         Corn prices continued to feel the pressure of a rapid planting progress, with good rains expected in western areas in the days ahead to help bring the crop up.

·         The new-crop soybean/corn price ratio is trading at 2.49 to 1 this morning; attempting to buy more soybean acres at the expense of corn.

·         Wheat prices slid on ample world supplies overnight, ahead of the start of the Wheat Quality Council’s tour of the Central Plains crop this week.

·         China will offer 3.4 million bushels of reserve corn up for auction this week, up nine-fold from the previous week as it tries to get rid of high-priced corn that it bought from farmers under its subsidy support program.

·         The next two weeks are expected to see quite a bit of rain in the Midwest, focused on some of the areas that have been driest in recent months, while easing back on wet eastern areas. To allow planting progress.

·         The Plains wheat belt is expected to remain under a wet pattern as well, favoring winter wheat production.

·         No major production problems are seen in the world currently outside of the Central Plains that will be toured by the industry this week.

Commodity Weather Group Forecast

In the U.S., scattered weekend showers favored northern NC early and parts of eastern NE, far southwest/east-central IA, far northwest MO, northern IL, far southeast MN, and western WI late, while a few light showers were also noted in the western Plains.

Thundershowers will slowly expand in the northern/western Midwest this week, although the wettest weather is not expected until the weekend. A few drier days are then possible early next week before additional rains develop in the western corn belt for the 11 to 15 day. The showers will slow the planting pace but do not appear excessive and will aid newly seeded crops from major advances in recent days.

The OH Valley/Delta will tend to miss much of the rain this week and remain somewhat on the edge of the storm track in the 6 to 15 day as well, allowing good planting progress to continue in these areas. The 16 to 30 day limits above normal rain to the western edge of the corn belt.

Rains expand by mid-week in the Plains and remain very active through the next 2 weeks and into the 16 to 30 day, aiding heading winter wheat. Spring wheat seeding will run into some interruptions at mid-week, but interruptions are fairly limited otherwise.

In South America, weekend rain (.50 to 1.5”, locally 3”) covered the south 1/2 of Brazil corn/soy. Rains move across the north 1/2 of corn and all of coffee/sugar in the next 3 days, aiding corn/coffee but stalling sugar harvest. Additional rains early next week benefit corn areas but miss main soy harvest areas, improving progress. Sugar harvest delays do not ease until a drier 11 to 15 day period.

Argentine rain (.50 to 2”, locally 4”) covered the southeast 3/4 of belt early in the weekend, further setting back corn/soy harvest. Mainly dry conditions in the next 2 weeks should allow harvest to slowly recover.

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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