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Morning Outlook

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Overnight Highlights

·         The European Central Bank is believed to have purchased Spanish bonds overnight, adding pressure to the euro, while pushing the dollar to one-week highs.

·         The ECB is trying to keep the Euro-zone out of another recession amid reports that 11 of the region’s banks failed recent stress tests.

·         However, corn and soybean prices rose to more than one-month highs overnight on follow-through technical buying as demand exceeds the pace of new-crop deliveries in central and eastern parts of the Midwest amid the sluggish start to the harvest.

·         Gulf corn offers dropped 10 to 15 cents as farmer sales picked up on the rally Tuesday afternoon, but a robust battle over supplies by exporters and processors kept soybean basis offers firm, even though farmer sales of the oilseed picked up as well.

·         Ukraine wheat exports are expected to increase by 28% this year, along with a rise in Russian exports, limiting gains in Chicago wheat on the current rally. Ukraine’s wheat harvest exceeded the previous year’s level by 6.3%, despite losses of war.

·         Light showers should briefly slow harvest activity in the western Midwest Thursday, but the weekend looks dry.

·         Showers are expected to expand in central areas of the Midwest on Tuesday, and in eastern areas by the 11- to 15-day period, slowing harvest once again.

·         Showers are expected to become extensive for dry crop areas of northwestern Brazil starting tomorrow night, reducing lingering dryness to just 10 to 15% of the belt by the middle of next week.

Commodity Weather Group Forecast

In the U.S., only sprinkles lingered in eastern fringes of the Midwest yesterday. Light showers briefly slow western Midwest harvest Thursday, but the weekend is dry. Showers expand into central areas next Tuesday and in the east by the 11 to 15 day, slowing later harvest. Delta/Southeast harvest remains favorable for the next 2 weeks. S. Plains wheat may see beneficial 11 to 15 day rain. Pacific Northwest rain potential is better in the next 10 days, improving wheat growth.

In South America, showers favored far northern Goias and a few nearby sections of Minas Gerais but also scattered across central/southeast Minas Gerais and central/northeast Mato Grosso. Amounts of .50” or more were very limited, and 2/3 of coffee and 3/4 of sugarcane remain very dry.

Showers will scatter into the belt again Sunday to Tuesday, and the Euro trended wetter again (although still not as wet as the GFS). Our forecast inched wetter but kept amounts lighter than either model, given the underperformance of showers this week. While coverage could end up fairly extensive, amounts may mostly be .25 to .75” for remaining dry areas, particularly in northern Sao Paulo and western Minas Gerais. Shower potential may expand by early in the 16 to 30 day based on the latest CFS and Euro guidance.

Rains are still expected to become widespread for northwest soy areas starting tomorrow night, and concerns should be reduced to about 10% of soy and 15% of corn by the middle of next week.

While the 11 to 15 day did trend wetter in western areas, the main Argentine rain event is early next week. This will slow corn seeding, but notably wet pockets should still be limited to less than 1/4 of corn/wheat.

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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