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Morning Outlook

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Overnight Highlights

  • Overnight markets have corn +1, soybeans +8, wheat +2, crude oil -.27, dollar +.14, gold -1.0 and the Dow +49.
  • Mixed to supported trade again overnight with soybeans finding support on good demand and talk of heat moving back into the Midwest. Corn continues to suffer under the weight of increasing yield expectations but reluctant to go lower on charts low on energy and rising global feed grain prices and US corn demand.
  • Huge demand is on the docket for US corn, soybeans and wheat for the end of 2016 and beginning of 2017. The question for the market right now is one focused on crop size.
  • Yesterday’s report from the Wheat Quality Council wheat tour saw yield estimates from the first day at 43.1 bpa. This is off from the 51.1 bpa seen last year and the long term average of 45 bu.
  • French grain grower group estimate the 2016 French wheat crop at 30 mln mt vs last year at 41 mln due to the heavy rains.
  • The shut off in farmer selling on the break has processors hoping for a futures rally to release more bushels as they chew through what they have in ownership or they will have to resort to continuing to improve their cash offers soon.
  • The Federal Reserve will conclude their FOMC meeting today. Most participants do not see the Fed raising rates.
  • Tuesday funds bought 5,000 soybeans, were even on corn and sold 6,000 wheat.

Commodity Weather Group Forecast

 

In North America, showers favored southern/eastern ND, northeast/south-central SD, west-central MN, central NE, southeast MO, southern/east-central IL, south-central IN, far southern OH, west-central TN, southeast LA, southwest MS, northcentral MT, and southwest Canada in the past day. Highs were in the low 80s to low 90s in the Midwest, with 90s across the South. Scattered showers during the balance of this week will scatter through the MS Valley but mainly favor the far southern

Midwest/northern Delta. Rains then track farther north in the 6 to 10 day due to a modestly warmer pattern (mid 90s southwest), bringing better rain chances into the central Midwest compared to yesterday. An active shower pattern then favors the west in the 11 to 15 day, with eastern areas similar to drier versus yesterday. Highs otherwise remain similar to yesterday. Rains will continue to favor corn/soy yields in most areas, with the driest spots in the eastern 1/4 of the Midwest into the 16 to 30 day (although the Euro guidance does show wetter risks there in the next ten days). A period of stronger heat (perhaps similar to last week) could still move through around mid-August in the Midwest but remains unlikely to be sustained, and this should limit stress outside of the mentioned dry areas. Delta rains will aid late soy development this week. Frequent showers in the Canadian Prairies will keep areas of surplus moisture in place for wheat/canola, elevating disease risks.

 

In China, an overall drier pattern for the North China Plain in the balance of the next 10 days helps to ease wettest corn/soy areas in the north, despite some showers in the short-term. Elsewhere, moisture is adequate to support corn pollination/ soy pod set. In the Northeast, attention turns to the central 10% corn/15% soy, as ongoing dryness and highs in the middle 90s next week briefly cause stress. However, rain potential increases late next week, easing concerns.

 

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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