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Sunday Outlook

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Weekend Developments

·         Greece is believed to have enough cash to make its payments this week, including a 200-million euro payment to the International Monetary Fund due on Wednesday. Another 770 million euros are due to the IMF the following week on Tuesday.

·         Greece has had four days of intense negotiations with its credits and the two sides apparently remain far apart, but sources close to the negotiations say that the atmosphere surrounding the talks has improved significantly from the tensions of the previous weeks.

·         Some rainfall totals over the weekend exceeded 1” near the Iowa/Nebraska border, but rains were otherwise confined to western areas of the Midwest and were largely under 0.25”.

·         Most areas should remain dry until Tuesday, when rainfall will slow fieldwork for roughly a week, favoring western areas where planting progress has made the most progress in recent weeks, including some very dry western areas.

·         The Plains wheat belt is expected to remain active for much of the month, supporting grain fill in the winter wheat crop.

·         The Wheat Quality Council is sponsoring an industry tour of Kansas and surrounding areas this week. This tour provides the bulls with their best opportunity to scare speculative hedge funds out of their massive short (sold) positions.

·         Friday’s CFTC report showed that the speculative hedge funds held large net short positions that were just shy of record levels in Chicago wheat and that set new record large levels in KC wheat as of April 28.

·         Hedge fund managers held net short positions in corn of 626 million bushels as of April 28, up from net short 524 million the previous week, while they cut soybean net short positions to 129 million bushels.

·         Rains are expected to spread across Brazil’s safrinha corn area this week to boost pollination and grain fill, with a  repeat again next week as well.

·         Argentina received heavy rains over the weekend to delay harvest progress, but the next two weeks are expected to dry out for allowing harvest to advance.

Commodity Weather Group Weekend Summary

In the U.S., spotty weekend showers occurred, but the most organized activity was limited to east-central NE, northeast KS, southwest IA, northwest MO, and northern NC. Other than a few spots near the NE/IA border than picked up over 1” of rain, totals were mostly .25” or less.

Showers will remain limited early this week in the Midwest but will become substantial in the northern/western belt starting Tuesday. Interruptions to fieldwork will remain frequent for about a week, with some better progress possible again after the middle of next week. Most of the rain will miss the Delta until after next weekend in support of continued needed drying for seeding and to ease wheat quality concerns, but more frequent rains may then return in mid to late May. The CFS guidance for the 16 to 30 day does still show some rains in the northwest Midwest but is not as wet as solutions in the past 2 days for the corn belt and better matches our outlook.

An active Plains pattern through much of this month will support improving yield potential for heading winter wheat. N. Plains spring wheat areas trended wetter starting at mid-week and will see minor late planting delays, while interruptions should remain more limited in Canada.

In South America, rains developed in the past day in southern Brazil (.50 to 3”), stalling soy harvest. Rains linger today, but drier weather in the next 2 weeks then allows late harvest to recover. Rains spread north across safrinha corn this week, with another wave of showers next week as well to avert moisture stress during peak pollination and ensure near to above trend yields. Rains in coffee areas in the next 10 days improve late filling but slow sugarcane harvest. Drier weather in the 11 to 15 day should improve sugar harvest.

Argentina corn/soy areas had heavy rains (.50 to 2”, locally 4”) in all but the northwest 1/4 of the belt this weekend. Dry weather now dominates in the next 2 weeks, which is essential to allow harvest to get back on track and to avert damage.

 

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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