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Morning Outlook

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Overnight Highlights

·         The yen lost value against competing currencies overnight after Prime Minister Abe called for an early election and suspended a scheduled sales-tax increase.

·         European stocks rose after German investor confidence posted gains for the first time in 11 months. Germany is Europe’s biggest economy.

·         USDA’s weekly crop progress report Monday afternoon showed corn harvest at 89%, beating trade expectations.

·         Soybean harvest progress at 94% was slightly below expectations.

·         Winter wheat condition scores were unchanged on the week, when the trade expected a small downward adjustment due to last week’s arrival of Arctic air in the belt.

·         Soybeans and soymeal dipped on rising supplies Monday evening, but have firmed back into positive territory on robust demand this morning.

·         Strength in soybeans supported corn, but wheat dropped on follow-through selling. Export demand for both corn and wheat remains poor at current price levels.

·         Widespread rain is expected over Brazil’s grain belt from Friday into next week, favoring crop development.

·         Southern and eastern areas of Argentina’s grain belt are battling surplus moisture.

Commodity Weather Group Forecast

In the U.S., light snow lingered in the southeast Midwest (1 to 4”) yesterday, while rains fell in the Southeast (.25 to 1.5”). Drier weather this week allows some recovery of late soy/cotton harvest in the Delta, but rains return this weekend and stall harvest and late wheat seeding.

Most Midwest corn harvest finishes up this week except WI/MI. Colder than normal Midwest temperatures continue to hamper late wheat germination and threaten acreage loss in up to 10% of the belt. The latest Euro is quite cold at end of the 10-day period for Plains wheat, but winterkill threats are low given a lack of other model support.

In South America, thundershowers were limited to northern fringes of Brazil yesterday (mainly northern Bahia), with a few spotty showers also along the southern edge of La Pampa in Argentina. Scattered Argentine showers return tonight into Thursday in about 1/2 of the belt, with additional chances most likely early in the 6 to 10 and by the middle of the 11 to 15 day period.

While heavy amounts are unlikely, long-term concerns with surplus moisture in mainly parts of Buenos Aires and Entre Rios will continue to hinder corn/soy seeding in up to 20% of the belt, in addition to ongoing quality and loss concerns for at least 1/4 of wheat. Highs mostly in the 90s yesterday linger today but then ease.

Brazil rains will return from Friday into next week for most of the belt, ensuring stable crop conditions through nearly the entire region. Parts of southern Minas Gerais, southern Goias, Sao Paulo, and Mato Grosso do Sul may still need to be watched for pockets of excess moisture next month, but this remains a limited risk as forecast guidance has tended to be wet-biased lately in interior Brazil.

China Wheat Should See Needed Rains Next Weekend, But North Half Not Favored. The rains this weekend look likely to improve fall growth in at least 1/2 of the crop area. However, the north is least favored, and this could leave nearly 1/4 of the crop which is not irrigated poorly established this winter.

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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