Home Market Market Watch Sunday Outlook

Sunday Outlook

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Weekend Developments

·         Greek citizens are currently voting on whether to accept creditor terms that are no longer on the table, with pundits calling it a vote on whether to stay in the Eurozone. A total of 9.8 million Greeks are eligible to vote in the election, with the vote count available later at this Website.

·         A Bloomberg poll found that 43% intend to vote “no” and 42.5% vote “yes” while 14.5% remained undecided. The final results of the actual vote are expected to impact tonight’s currency trade.

·         Meanwhile, China stepped up efforts over the weekend to stem the decline of its equity markets that have seen the steepest plunge since 1992 in recent weeks. State media tried to calm investors, while brokerages pledged to buy shares of stock. Twenty-one brokerages agreed to invest 120 billion yuan ($19.3 billion) into a fund to back the market. Officials state that the matter has now reached a level to where it could trigger a broader financial crisis if not managed properly. This has the potential to be a much larger story than Greece, but has been hidden behind the Greek news.

·         The weather outlook, both domestically and globally, is a bit better today. The southwestern Midwest is similar to a bit drier, although the Ohio River Valley remains wet. The Midwest won’t be quite as cool and modest relief is seen for Europe and Canada, although not a dramatic change in pattern. Shower potential has also improved for dry areas of Eastern Australia in the 6- to 10-day period.

·         Thunderstorms favor the northwestern Midwest tonight, scattering south and east across the Midwest through mid-week. A second system favors the southern Midwest Thursday and Friday. The wet pattern may also finally ease a bit for saturated areas of Missouri and southern Illinois next week.

·         The grain and oilseed markets have enjoyed a three-day cooling off period, with an USDA crop report expected out this Friday. Major chart objectives have been either been reached or approached that suggest that a pull-back is quite possible ahead of Friday’s USDA report, which traders will be looking to USDA to adjust corn and soybean yields.

·         Farmers are selling rallies, with basis weakening across the Midwest. Similarly, we’re seeing end users buy price breaks to provide support. Prices continued higher in 2012 with periodic brief, but abrupt, corrections. However, history says that it is easier to keep the trade focused in a bull market based on hot dry weather than it is in years with persistently wet weather.

·         Tomorrow afternoon’s USDA weekly crop progress report will likely need to show substantial additional damage to keep the trade focused near-term.

Commodity Weather Group Weekend Summary

In the Midwest/South, rains during the holiday weekend scattered along the western edge of the Midwest and into the Deep South but favored AR, central LA, northern MS, AL, central/far southwest TN, KY, and southern SC. Thundershowers will favor the northwest Midwest through tonight and then scatter to the south/east through mid-week, with a second system favoring the south Thursday/Friday. 6 to 15 day shower chances improve for spots in the west and around the Great Lakes that miss this week’s rain.

The wet pattern may also finally ease a bit next week in the very wet sections of MO/southern IL. More frequent rains continue farther east in IL/IN/OH to allow wet pockets to persist in low-lying areas and river bottoms, leading to variable yield potential. While not as cool of an outlook, intermittent bouts of notable heat (mid 90s or better) are mostly limited to KS and the Deep South in the next 2 weeks, with only a brief expansion today and next weekend into parts of southern NE. The lack of severe heat will be very favorable for corn/soy yield potential. CFS 16 to 30 day guidance is not hot and shifts the wettest weather farther west in the Midwest and is drier than normal in the Delta/Southeast.

In the Plains/Canada, showers were scattered over the weekend in central Alberta, west-central Saskatchewan, near the Canadian border, western ND, northern MT, northwest MN, eastern SD, eastern NE, northern/western KS, central/southeast OK, and northwest TX. Guidance supports some wetter risks in the 6 to 15 day for Canada, and our forecast is a bit wetter in Alberta in the 6 to 10 day. However, moisture stress may still persist for at least 1/2 of the Prairies wheat/canola, reducing yields. Occasional heat in MT should have limited impacts at this stage for spring wheat, and winter wheat harvest delays are most likely at mid-week and in the 16 to 30 day.

 

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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