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Morning Outlook

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Overnight Highlights

·         It was a quiet news night in the broader markets, allowing grain and oilseed traders to focus on supply and demand fundamentals. The dollar turned modestly lower after failing to test the previous session’s three-month high, but it remains strong overall after another member of the Fed reinforced expectations Monday that we could see an interest rate hike as soon as September.

·         There’s a lot of talk in the global markets this morning about the collapse in commodities after the major commodity indices have collapsed in recent days. Everyone is dumping on the commodity sector with complaints about the poor global economy, which suggests to me that the bottom may be close. It’s always darkest at midnight.

·         Data released overnight confirmed that Chinese soybean imports rose to their second highest rate on record in June as the world’s largest importer snatched up cheap South American supplies. Brazil shipped China 245 million bushels of soybeans last month, up 23% on the year.

·         Egypt released another snap tender to buy wheat for early September delivery late Monday. Results of the tender, which are expected later this morning, will likely remind the market once again that U.S. wheat remains too expensive on the global market. In fact, U.S. sources didn’t even submit offers according to sources close to the tender. The lowest offer was $5.27 per bushel FOB.

·         USDA’s weekly crop progress report reflected improving corn ratings at a time when they historically turn lower as the crop matures. Most significant in the data was a big increase in condition scores for Ohio, which has battled problems created by persistent rains. Already high ratings in the northwestern Midwest continued to push higher, suggesting record high yields across that portion of the belt.

·         Soybean condition scores remained unchanged on the week, but like corn, are still above the running 10-year average for this time of year. Condition ratings slipped lower from Iowa and Missouri eastward across Ohio, but largely improved elsewhere with strong ratings in the northwestern belt.

·         Winter wheat harvest reached 75% as of Sunday, while spring wheat is virtually all headed now. Spring wheat condition scores improved modestly, with the best yield potential in the biggest production states of Minnesota and North Dakota.

·         Soybeans found strength overnight from strong demand from both the processor and export fronts. The oilseed resisted the big losses in Monday’s commodity sell-off and were quickest to turn higher in the overnight session, with basis bids strengthening from many processors. Corn and wheat may continue to struggle until we get deeper into next month and get a better handle on corn yields.

·         The Midwest looks pretty dry this week, other than some weekend storms in the upper Mississippi River Valley. Rains return in northern areas next week, while saturated southern areas remain dry until the 11- to 15-day period. Warmest readings should occur on Friday, Monday and Tuesday, but mid-90s or better are mainly focused on Kansas, Nebraska and the Delta. The 16- to 30-day outlook is milder with showery conditions for the Midwest.

·         Showers are expected to favor northwestern and eastern areas of the Canadian Prairies over the next 10 days, keeping stress limited to less than one-third of the wheat/canola belt. An industry tour of the crop belt over the next several days should provide better clarity to damage already done to crops in the region due to this year’s dryness.

Commodity Weather Group Forecast

In the Midwest/South, scattered thundershowers favored parts of central/far southern MO, western KY, far east-central IL, central IN, and far southwest OH in the past day. Weekend storms may develop in the upper MS Valley, but the Midwest otherwise dries this week.

Rains return in the north in the 6 to 10 day to keep dry spots limited for pollinating corn and blooming soy, while the wet sections of the southern Midwest see limited activity until at least the 11 to 15 day to ease concerns. SD/southwest MN could be on the edge of the better shower activity next week and would be at most risk of being shortchanged. Rains will expand in the Delta and parts of the Southeast this week and possibly again in the 11 to 15 day, although LA and southern AR soy may still need to be watched for some dry spots given the warm pattern.

The warmest temperatures should occur on Friday, Monday, and Tuesday, but mid-90s or better are mainly focused on NE/KS and the Delta. The lack of more notable heat will also help to limit concerns for Midwest corn/soy. Milder/showery conditions in the 16 to 30 day will aid Midwest corn/soy, with warmer/drier risks still mainly in the Delta/Southeast.

In the Plains/Canada, thundershowers favored northern OK, far southern KS, and northwest TX and will continue for the next 2 days, with intermittent 6 to 15 day showers in the C. Plains. However, late wheat harvest interruptions should not be serious. Rains did favor northern/far southern Alberta yesterday and will favor the northwest/eastern Prairies in the next 10 days to keep additional stress limited to less than 1/3 of the wheat/canola. Drier conditions likely return in August.

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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