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Morning Outlook



Overnight Highlights

* Overnight trade has corn +2, soybeans +6, wheat +2, crude -.10, dollar index -.25, gold +.5 and the Dow Jones -10.

* European stock markets are mostly lower while Asian overnight trade is mixed.

* Canadian Liberals sweep national election, eh? Nine years of rule by center-right Conservatives comes to an end with the election of a majority Liberal party candidates. Liberal party candidates trounced both Conservative candidates and left-wing NDP candidates – installing Justin Trudeau as PM. Trudeau’s platform is generally friendly to international trade.

* OPEC countries as well as Russia and Mexico are meeting in Vienna this week. While there is little expectation of concrete steps to reducing oil production, the prospect of these major countries in talks may discourage further bets on new lows in crude.

* Iran’s announcement that they have found a buyer to purchaser over 500,000 barrels a day in exports once sanctions are lifted continue to weigh on the energy markets.

* US crude output looks to have peaked at a record 9.6 million barrels a day in April and has now fallen to 9.1.

* Safras Mercado estimated Brazil corn planting at 53.8% complete vs 41.9% last year on this date.

* China continues to shop for US soybeans with talk of another 2 to 4 cargos bought yesterday.

* Indonesian Palm Oil Association have cut their Indonesian palm oil production forecasts in recent weeks due to El Nino.

* Reports from the floor Monday had funds sellers of 6,000 corn, 7,000 soybeans and 5,000 wheat.

* Ukraine and W/S Russia have had rainfall at 50% of average over the last 90 days leaving winter wheat underdeveloped. The forecast for this week shows some chance for moisture, but not likely enough to end concerns.

Commodity Weather Group Forecast


In the U.S., isolated showers (.25 to 1″) were mainly confined to the TX Panhandle. Rains increase substantially across the Plains hard red wheat belt tomorrow through early Friday, improving crop establishment in all areas. Heavy rains in the TX Panhandle will lead to localized cotton damage and quality declines, as much of the crop is not harvested. Midwest corn/soy harvest will only see minor delays from light rains this weekend. Despite the light amounts, Midwest wheat should still derive some benefit. Delta rains late this week and early next week only impact the very late cotton/soy harvest, while improving germination conditions significantly. Southeast cotton/soy harvest should continue to recover in the next ten days.

In South America, showers in Brazil were limited to a few spots in Mato Grosso (mainly north) and far southern Rio Grande do Sul yesterday. The break will help to limit the severity of any wetness concerns that arise in southern wheat areas from frequent expected showers over the next two weeks. While fieldwork will slow, quality losses and lodging should be limited. Scattered showers reach into southeast Minas Gerais and eastern Sao Paulo from Thursday into the weekend, but the broadest coverage remains next week as tropical support from an MJO event helps to trigger better rains. While some impact has already been seen to flowering for dryland coffee from recent dryness, the rains will ease concerns for now and will also initiate more notable seeding in currently hot/dry northern soy areas. Sugarcane fieldwork may slow for three to four days next week, but a quieter 11 to 15 day limits concerns. Argentina picked up light showers in La Pampa, western/northeast
Buenos Aires, northern Santa Fe, and northern Entre Rios in the past day. While still some model debate and not a particularly wet pattern, rain events in the 6 to 15 day should be adequate to keep corn/wheat conditions stable.

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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