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Morning Outlook



Overnight Highlights

·         China found a way to stop the rout in its stock market, at least for now. It banned major stock holders from selling stakes in listed companies for a six month period. That made it safer for bargain hunters to step in and buy on the exchange overnight, but observers say it simply put off the inevitable and didn’t solve the long-term problems. Regardless, the Shanghai Composite Index had its best session since 2009, gaining 5.76%.

·         European traders anticipating a Greek exit noticed that the sun still came up this morning. They’re increasingly optimistic that the European Union will do fine without Greece, leading to a rally in its stock market overnight. The euro was modestly lower overnight after big gains Wednesday, while the dollar posted small gains after yesterday’s big losses. U.S. stock futures suggest big gains to open up trade today.

·         Crude oil prices are rebounding this morning on the strength in the Chinese and European markets, with a couple of reports out saying that the associated problems that had been pressuring those markets will not likely impact demand.

·         A combination of the above are bringing back buyers to the commodity sector with money flowing again into the broader commodity indices, of which the grains are a part. Traders are again talking about this week’s heavy rains in saturated areas of the southern Midwest and potential crop deterioration to show up in Monday’s weekly crop progress report.

·         Soybeans lead the grain complex higher this morning following yesterday’s big 8.8 million-bushel sale of new-crop soybeans to “unknown destinations,” which will be presumed to be China. The price break stimulated demand and that’s good for soybeans.

·         Conab, Brazil’s version of our USDA, calls for a record safrinha corn crop this year, bringing total corn production to 81.81 million metric tons, up from 80.21 mmt previously and up from USDA’s June estimate of 81.00 mmt. It also raised its 2014-15 soybean production estimate to 96.22 mmt, up from USDA’s latest estimate of 94.50 mmt. USDA will be updating its estimates tomorrow at 11 a.m. CDT.

·         Thunderstorms are expected to again scatter across eastern areas of the Midwest today and southern areas tomorrow. Activity is then expected to lift farther north and east from Saturday through Monday. The storm track stretches from Nebraska to Ohio in the 6- to 15-day period, although there are drier risks to the forecast, particularly for eastern areas.

·         Temperatures are expected to warm over the next couple of weeks. However, peak temperatures should be in the mid-80s to low-90s for the Midwest, with higher temperatures limited to Kansas and surrounding areas.

·         Rains are expected to increase in Canada early next week, with similar chances in the 11- to 15-day period. Some forecast models are wetter, but Commodity Weather Group believes that the southwestern half of the wheat and canola belts will remain unfavorably dry and vulnerable to notable yield losses. Drier areas may see occasional 90s as heat builds in the area.

·         Light showers benefited dry corn areas of Hungary overnight, but France and Spain remain dry over the next 10 days.

·         Rains are expected to ease dryness in southeastern Australia over the next week, while dryness hampers spring growth in the western third of the wheat belt.

·         Indian Monsoon rains will likely remain limited over the next 10 days, threatening stress for groundnut areas later this month.

·         Grain and oilseed prices are rebounding this morning, with corn prices still near their recent six-month highs. Traders are positioning for tomorrow morning’s USDA crop report. Trade expectations going into the report are as follows:

Old-Crop Stocks




billions of bushels

USDA July 10 Report

    Pre-Report Estimates

Average Trade Estimate



Highest Trade Estimate



Lowest Trade Estimate



Previous USDA Estimate



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U.S. New-Crop Ending Stocks





billions of bushels

USDA July Crop Report

Average Trade Estimate




Highest Trade Estimate




Lowest Trade Estimate




Previous USDA Estimate




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U.S. Yields & Production







Yield in bushels per acre

Production in billions of bushels

USDA July 10

    Pre-Report Estimates

Average Trade Estimate





Highest Trade Estimate





Lowest Trade Estimate





Previous USDA Estimate





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Commodity Weather Group Forecast

In the Midwest/South, thundershowers favored far northern OH, far southeast MI, northern IN, central/far southern IL, central/far southeast MO, and western KY in the past day. Thundershowers again scatter across the eastern Midwest today and the south tomorrow, with activity then lifting farther north/east from Saturday through Monday.

The 6 to 15 day storm track favors parts of NE/IA/IL/IN/OH most frequently, although there are drier risks on the forecast guidance (particularly east). While not necessarily as wet of a pattern as recent conditions, the active pattern will focus the most notable wetness concerns on low-lying fields and river bottoms in IL/IN/OH, and MO will stand the best chance for wetness to ease next week.

Temperatures will warm but should still peak in only the mid-80s to low 90s for the Midwest over the next 2 weeks, with mid-90s or better limited to KS and perhaps a few spots in southern MO/NE. Rains should expand into the Southeast in the 11 to 15 day to aid growth, while drier conditions in the Delta reduce moisture supplies gradually in the wake of recent heavy rains. The 16 to 30 day remains driest in the Delta and wettest in the northwest Midwest, with mostly seasonable temperatures.

In the Plains/Canada, thundershowers favored central/northwest TX and north-central/southwest OK in the past day. Rains early next week increase in Canada, with a similar chance in the 11 to 15 day. While some guidance remains much wetter, our forecast keeps at least the southwest 1/2 of wheat/canola unfavorably dry and prone to notable yield loss. Occasional heat will also push drier spots into the 90s. Current Plains wheat harvest interruptions ease over the next 2 weeks.

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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