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Sunday Outlook

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Weekend Developments

·         Tempers flared openly as European finance ministers met Friday, with anger directed toward Greece for its attitude toward the rest of the group.

·         Greece is running out of cash, with the first of two International Monetary Fund payments due on May 6. The Greek government doesn’t even know if it has enough cash to pay pensioners and state employees this week.

·         The above should keep the currency markets volatile, depending on the headlines that flow out of Europe each day.

·         Friday’s CFTC report showed that speculative fund managers reduced their net short (sold) positions in soybeans, but added to their short positions in corn and wheat, with Kansas City wheat now at a record short position.

·         Corn, soybean and wheat charts all have a bearish bias to them.

·         Active infestations of “heavy” stripe rust have been confirmed in Kansas wheat, providing yet another threat to the crop at a time when many question the economics of whether the state’s crop is “worth saving.”

·         The wheat market has repeatedly sold off on supportive news due to poor export demand. The stripe rust story provides yet another opportunity for KC wheat to lead the way higher on a bounce ahead of the early May Wheat Quality Tour of Kansas and surrounding states with speculative hedge fund managers holding massive short positions.

·         Corn looks bearish unless wheat can give it a short-covering lift, with the week ahead expected to be wide open for planting.

Commodity Weather Group Weekend Summary

In the U.S., weekend showers scattered from the central/northwest Plains into the central/southeast Midwest as well as from the far southeast Plains into the Deep South. Heaviest totals were in north-central KS, near the TX/OK border, southern AR, northern MS, and southeast GA.

Thundershowers favor the S. Plains into early Tuesday and the Deep South at mid-week, but limited showers and moderating temperatures otherwise will aid fieldwork for at least a week in nearly all of the Midwest and Delta before wetter weather gradually returns next week. The near-term rains will aid heading wheat in TX/OK and may also reach some W. TX cotton, but prospects are more limited in southern/western KS and southeast CO.

This may still leave 10 to 15% of Plains wheat under stress, with 6 to 15 day rains also favoring all but the far southwest Plains. 16 to 30 day guidance has trended wetter, favoring the central/southern Plains, Delta, and southwest Midwest. This would benefit hard red winter wheat but may again slow spring seeding and raise soft wheat quality concerns (particularly in the Delta). Spring wheat seeding interruptions remain minor from intermittent scattered showers into May.

In South America, rains in the past 2 days favored the north 1/2 of Brazil safrinha corn and coffee (.25 to 1.25”, locally 3.5”), while the south was dry. Soy harvest in the far south remains favorably dry until next weekend, allowing good harvest progress. Rains are likely to return to the south 1/2 of Brazil corn and remain active north in the 6 to 15 day, boosting yields during pollination. Limited rains in coffee areas hamper late filling in drier spots but improve sugarcane harvest.

Argentina corn/soy areas have been dry this weekend and will see showers limited to the far south at mid-week, aiding harvest until widespread showers return next weekend. Seasonable showers in the 11 to 30 day will still slow harvest but are not likely to threaten damaging delays.

 

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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