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Morning Outlook

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Overnight Highlights

·         The dollar firmed modestly overnight following a downgrade in economic outlook from the International Monetary Fund.

·         France boosted its estimate of domestic wheat stocks overnight.

·         USDA attaché in Argentina calls for 4% growth in soybean production.

·         Short-covering continues in grain/oilseed complex ahead of Friday’s USDA crop report, which is expected to increase yield estimates due to the fear of a bullish surprise.

·         Corn prices turn modestly lower after failing to take out Tuesday’s high in overnight trading.

·         Soybean prices consolidate modestly higher overnight in short-covering, but remain within the previous day’s trading range.

·         The bottom line is that this year’s big corn and soybean crops are already well above projected demand and are expected to get even larger.

·         Some support coming from potential for heavy rains further delaying harvest. Delays are expected to be greatest in the southeastern two-thirds of the Midwest and Delta the next 10 days.

·         Shower potential remains low for stressed southern 25% of Australian wheat next two weeks.

·         This morning’s forecast holds a wetter risk for the dry northern Brazil belt in the 11- to 15-day period.

Commodity Weather Group Forecast

In the U.S., showers scattered across the north 1/4 of the Delta and southeast 1/4 of the Midwest yesterday. Rains return Thursday and continue through Monday stalling harvest in the southeastern 1/2 of the Midwest and Delta. Damage will be very limited but cotton quality will suffer. The northwest 1/2 of the Midwest remains mostly dry. 11 to 15 day rains have contracted to the eastern 1/4 of the /Midwest, improving harvest for Delta and SW Midwest.

Plains wheat is still set to benefit from rains this week, improving moisture in drier areas of OK/CO. The Southeast cotton/soy harvest sees only minor shower delays next 2 weeks, The last 1/4 of Canadian spring wheat/canola harvest will benefit from limited rains next 2 weeks.

In South America, showers were limited to a few spots in far southwest Buenos Aires, central La Pampa, and central/west-central Mato Grosso yesterday. Rains return to the southern 1/3 of Brazil wheat by the weekend and are frequent for the balance of the 15-day period, keeping quality concerns in place.

A front late in the 11 to 15 day tracks farther north in Brazil, but our forecast is only slightly wetter than yesterday. The best chance for relief favors a little better than the southeast 1/4 of the coffee belt and far northwest corn/soy areas (mainly the western 1/2 of Mato Grosso). However, about 1/2 of the GFS ensemble members do support more widespread rains and pose a wetter risk.

Showers are otherwise limited into the 16 to 30 day period, with widespread 90s/100s in the north from the middle of next week into early in the 11 to 15 day. Our current forecast would maintain coffee flowering delays in at least 2/3 of coffee, with declining conditions for early corn/soy germination in nearly 1/2 of the belt.

Argentine rains in the next 2 days and at the middle of next week will maintain wet pockets in parts of southern Buenos Aires and Entre Rios (10% corn/20% wheat), but concerns are otherwise limited.

FSU Wheat Dry This Week; Showers Still Likely Limited Next Week, Hampering Fall Growth. Some models are trying to sneak rains into the northern/western belt next week, but the consensus is still dry. Expectations are for about 1/4 of the area to see continued dryness hamper crop establishment.

Rains May Increase in E. Australia Next Week, But Dry South Remains & Lower Yield Potential Likely. Victoria/S. Australia are likely to miss the rains next week, stressing heading wheat in about 1/4 of the belt.

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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