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Morning Outlook


• Chinese industrial profits fell at their fastest pace in four years, dropping 8.8% in August from the previous year. Stocks still rose modestly in China, thanks to what appeared to be government intervention once again, but the data raised fears in the global marketplace. European stocks fell 1 to 2%, while U.S. stock futures predict triple-digit losses for the Dow Jones Industrial Futures once again.
• As a result, traders are being cautious of positions in the broader commodity sector, with crude oil leading the complex lower this morning. Crude oil prices are near $1 lower this morning, providing a drag for the broader commodity sector.
• Wheat prices continued to rebound overnight, rising to one-month highs as chart signals continue to turn favorable. The world still has plenty of wheat, but many traders believe that has been priced into the market, while concerns are slowly rising regarding dryness in the U.S. winter wheat belt, Australia, Russia and Ukraine. However, Chicago continues to lead Kansas City, suggesting that this rally has limited room to run.
• Corn prices are posting fractional gains this morning after firming to their highest level since September 16 this morning. Wheat provided some support, but traders are also beginning to build in expectations of a tighter balance sheet with yields beginning to disappoint. However, gains will likely be limited ahead of Wednesday morning’s USDA quarterly stocks report known for its surprises.
• Soybean prices came under modest pressure once again overnight as China economic concerns rise again. Early yields have been good, although they are expected to pull back some as we get into the later soybeans. However, the bottom line is that it is still difficult to build a bullish case for soybeans based on the data currently available to the market, even with last week’s big sale to China.
• A few showers will scatter into the Upper Midwest later today and tomorrow, but rains otherwise focus from the Gulf Coast into the Tennessee Valley, the Southeast and the far southeastern Midwest through mid-week. Rains then expand in the far western Midwest and Plains from Friday into the weekend.
• The outlook for the Plains is much wetter in this morning’s outlook, which is much-needed for the winter wheat crop. Cooler trends in the 6- to 15-day period focus the best rains on parts of the Southern Plains, southern Midwest and Delta. A few spots along the northwestern edge of the belt will have the chance to touch the freezing market by the 11- to 15-day period.
• Rains in the Former Soviet Union are expected to be limited to northern and southern fringes of Russian wheat over the next 10 days, hampering establishment for the crop. Eastern Ukraine and adjacent areas of Russia should see dryness lead to spotty stands for more than one-third of the FSU wheat crop. Meanwhile, dryness in Australia is expected to persist over the next 10 days, focused primarily on the southeastern third of the belt, but with dryness now expanding west due to the lack of rains.