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Morning Outlook

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Overnight Highlights

·         European creditors tell Greece, “you tell us what you are going to do to stay solvent and in the Eurozone,” after  voters soundly rejected austerity on Sunday. A collapse of Greece could create up to $1 trillion in defaults, impacting the financial system in Europe and the United States. July 20th is largely seen as D-Day for Greece in Europe.

·         China’s main Shanghai Composite Index opened roughly 8% higher Sunday night after the government and trade groups took steps to calm fears of economic collapse over the weekend. However, the index settled just 2.4% above the previous session. Most stocks actually fell overnight, with two falling for each one that gained in value. The losers overnight were the smaller companies not supported by weekend maneuvers.

·         Most other Asian markets were lower on the developments in China, with widespread fears that the sell-off is not yet contained. That raises fears of decreased demand for commodities, with crude oil down nearly 5% this morning, slipping below the 100-day moving average to its lowest level since mid-April.

·         The dollar was at a one-month high overnight, amid a broad sell-off in commodities on fears of declining demand as economic fears spread in both Europe and Asia. That selling amplified what probably would have been a pull-back in the grains anyway following last week’s big gains, with a big USDA crop report coming this Friday.

·         Rains are recharging moisture in the northwestern Midwest currently, but they are expected to bring heavy 2” to 5” totals from Missouri into Ohio this week to maintain surpluses in the southern Midwest. However, the Midwest trends drier for the 6- to 15-day period. Mostly seasonable rains are expected for the 16- to 30-day period.

·         Showers provided southern Alberta over the weekend, with wetter risks for the 6- to 15-day period. However, Commodity Weather Group sides with drier models, which would allow stress to persist for up to 50% of the wheat and canola.

·         European heat is expected to break mid-week, but rain chances remain limited for western areas.

·         Light showers are possible late this week in eastern Australian wheat areas, but rains remain very limited in western and southern areas.

Commodity Weather Group Forecast

In the Midwest/South, weekend rains favored east-central/southern MN, southern SD, east-central/far northern NE, central/northwest IA, and much of the South, with the heaviest totals in southern AR/northern MS. Mid-90s to low 100s were limited to western KS/southwest NE. Showers currently in the northwest Midwest scatter activity to the south/east over the next 2 days, with rains favoring the south Wednesday to Friday.

The rains are helping to recharge moisture in the northwest but will bring locally heavy totals (2 to 5”+) from MO into OH again this week to maintain surplus moisture after the drier break in the past 4 days or so. The southwest Midwest does trend drier in the 6 to 15 day to ease concerns, while the eastern OH Valley still sees rain but lesser totals. Mostly seasonable 16 to 30 day rains are expected, with the wettest weather in the northwest.

Temperatures are not quite as cool, but the best chance for mid 90s or better is limited to drier sections of central/southwest NE and western KS (less than 10% of belt) late in the weekend. Heavy weekend rain did cause localized flooding in the southern Delta but recharged moisture, and more limited rains return for the rest of July.

In the Plains/Canada, widely scattered weekend showers occurred in the Plains and near the Canadian border. Locally heavy rain will threaten minor lodging in the S. Plains wheat belt tonight through mid-week, but drier conditions otherwise aid harvest until the 16 to 30 day. Showers mainly benefit southern Alberta during the weekend. Wetter risks exist in the 6 to 15 day, but our forecast continues to side with drier guidance and allows stress to persist in up to 1/2 of the wheat/canola.

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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