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Morning Outlook

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Overnight Highlights

·         Greek Prime Minister Tsipras surrendered to creditor terms for an agreement in overnight negotiations. See Sunday’s weekend outlook comments for details of the terms demanded by European leaders in which Greece has until Wednesday to codify all of the reforms into law in order to qualify for 86 billion euros ($95 billion) of aid.

·         The primary question facing Europe will be whether Greece can so dramatically change what is deeply imbedded into its culture or whether it will once again fail to live up to the commitments. Regardless, the European Central Bank appears ready to step in to provide assistance to Greek banks, although Tsipras will likely have to rebuild his coalition government in a short amount of time to pass the reforms.

·         The euro is trading modestly lower and the dollar higher this morning though on the uncertainty.

·         Crude oil is modestly lower on the stronger dollar, despite news that China crude oil imports in June were up 27% from the same month last year. Some of the crude oil weakness came from reports that North Dakota crude production rose 3% in May, suggesting that the state’s shale oil production may be more resilient than previously believed. Additional weakness comes from trade fears that a nuclear agreement with Iran is imminent, which would likely dump more Iranian oil on the global market.

·         Thunderstorms are expected to favor the eastern Midwest through Tuesday, with showers then crossing the entire Midwest the last half of the week. Another cool front is expected to push showers across the belt again later in the 6- to 10-day period, keeping eastern areas excessively wet.

·         Highs in the 90s F in the southwestern quarter of the belt Sunday linger into today, but then drop back to the mid-80s to lower 90s by mid-week. Another spike in temperatures is seen next week for three to four days with highs in the 90s to lower 100s. As a result, we’ll likely see yield impacts in Kansas and Nebraska where heat interferes with pollination.

·         Showers in the Canadian Prairies aided nearly half the belt favoring northern and eastern areas over the weekend. Showers will continue to provide relief in these same areas over the next two weeks. However, the southwestern half of the belt is expected to continue suffering  yield declines due to heat and dryness, with stress reaching down into the western quarter of the U.S. northern Plains.

·         Europe is trending even hotter over the next 10 days, with limited shower activity, creating stress for pollinating corn.

·         Rains benefit southern and eastern Australian wheat over the weekend, while prospects look slightly better for some relief in western areas in the 6- to 10-day period.

·         Corn futures opened lower overnight as expected, with farmers selling cash corn on Friday’s gains. Prices then firmed into positive territory overnight on crop worries, but are struggling to hold gains as soybeans sink this morning.

·         Soybeans opened lower Sunday evening as well, rallied into positive territory, but are again sinking into negative territory this morning on Friday’s poor technical action on the charts. Traders see August weather as critical for soybeans, leaving them vulnerable near-term after failing to even test the mid-summer high of $10.40 on Friday.

·         Wheat futures traded both sides of unchanged overnight and are modestly weaker on poor chart signals this morning and on poor demand amid cheaper alternative global supplies.

·         USDA releases updated crop ratings at 3 p.m. CDT this afternoon. They will likely show modest additional declines in condition scores.

Commodity Weather Group Forecast

In the Midwest/South, rains over the weekend favored S. IA, C. IL, C. & S. IN, OH early and NE ND, N. & C. MN, and WI late. Thundershowers favor the eastern Midwest today/tomorrow with showers crossing the entire belt the latter half of the week. Another cool front should push showers across the belt later in the 6-10 day and could keep some eastern areas excessively wet but showers should be more limited in the 11-15 day reducing wet corn/soy areas. Rains in the western belt should be sufficient to keep dry spots isolated and aid corn pollination.

Highs in the 90s in the SW 1/4 of the belt yesterday will linger today but drop back to mid-80s lower 90s by mid-week. Another spike of heat occurs next week with 3-4 days of highs in the 90s to lower 100s. KS/NE corn pollination should see yields shaved back by the heat but other areas unlikely to be impacted. Rains in the Southeast in the 6 to 10 day ease moisture shortages and avert yield loss for most soy/cotton. Delta dryness will reduce moisture supplies and lead to some developing moisture stress cotton/soy next week. Most of the corn crop should be well into filling in the Delta by the time dryness becomes significant and would see minimal impact.

In the Plains/Canada, rains were very limited in the S. Plains and will remain so allowing winter wheat harvest to push to completion in next 2 weeks. Showers in Can. Prairies aided nearly half of  the belt favoring the N. & E. belt over the weekend and will continue to do so this week, but nearly half of the belt, mainly SW, will continue to suffer yield declines to wheat/canola. Only the W. ¼ of the N. Plains spring wheat may see spotty moisture shortages hamper filling next 10 days.

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

Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK involved in trading futures and or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL. This information is provided freely and is NOT in the capacity of a trading advisor. NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. Information provided is not to be construed as an offer to sell or solicitation to buy any commodity or security named herein.

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