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Morning Outlook

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Overnight Highlights

  • The dollar rebounded overnight ahead of a European Central Bank meeting, up more than 500 points this morning, with crude oil adding to yesterday’s gains when it pushed above the 100-day moving average for the first time since last summer.
  • China’s economy grew at 7.0% in the first quarter, matching expectations, but still down from 7.35 the previous quarter and the slowest in six years.
  • Going against the trend this year, Chinese farmers plan to increase corn acreage by 1.9% for the coming growing season.
  • Iowa confirmed its first case of avian flu Tuesday and Minnesota confirmed eight more cases. Not only is this a threat to pork prices longer-term, but it also is starting to soften soymeal demand.
  • Forecasts for heavy rains in previously dry areas of the Plains as well as good moisture in Ukraine have weighed on wheat prices this week, although the market posted modest gains in a technical bounce overnight.
  • The Australian Bureau of Meteorology warns that El Nino is likely to be a factor for that region’s winter wheat growing season. In fact, local analysts state that the analog year for this year’s event is 2007, when good early rains evaporated and the country produced just half a crop at 13 mmt.
  • Corn prices slid overnight on plentiful global supplies.
  • This morning’s model run posts a wetter risk for the western Midwest late this weekend, but confidence is limited due to a lack of model consensus.
  • The National Oilseed Processors Association is scheduled to release its March soybean crush total at 11 a.m. CDT this morning. The pre-report trade estimate is 155.261 million bushels, which essentially matches our submitted estimate as well.

Commodity Weather Group Forecast

In the U.S., thundershowers scattered across the South, favoring southern LA, southern MS, southern AL, southeast AR, far northwest MS, western TN, and northern NC yesterday. The best break in showers for the Delta occurs between Monday and Thursday, although the Gulf Coast could see mid-week showers. While flooding issues should remain localized, the wetter than normal pattern will still raise quality risks for the Delta and near the OH River and will slow seeding progress.

While model agreement is limited, the Midwest outlook trended wetter in the west late this weekend, improving the chance for some beneficial pre-planting moisture. Rain delays otherwise seem fairly limited in the Midwest in the next 2 weeks, although cooler 6 to 15 day trends may slow fieldwork a bit following the weekend rain. Showers still appear limited near the Canadian border, although the lack of showers will aid Northern Plains spring wheat seeding.

Widespread rains from late Thursday into the weekend will aid most Plains winter wheat, with the heaviest activity in the northern 1/3 of the belt. Additional chances exist in the 6 to 15 day, while the 16 to 30 day is a bit drier but still focuses wet weather from the Delta into the OH Valley.

In South America, showers (.25 to 1.25”, locally 2”) favored eastern/southern Brazil corn yesterday, with additional showers this week and again next week to keep moisture abundant as key pollination approaches. Showers this week slow Brazil soy harvest, but drier conditions next week keep delays limited. Stress in coffee areas should ease next week and sugarcane harvest slows (but not heavy enough to be damaging), as showers reach the area.

Argentina rains (.50 to 2”, locally 3.25”) fell across the belt yesterday. Rains continue in all areas this week, halting corn/soy harvest. Showers next week are still likely but should be too light to exacerbate wetness, with drier 11 to 15 day conditions likely to allow harvest to resume.

Extensive Rain Potential for China Wheat This Weekend Looking More Likely. The timely surge in rains (.25 to 1.25”) will ensure dryland wheat has abundant soil moisture supplies and enhance yield potential, as the crop moves through jointing. The showers will aid soy germination, as early seeding is about to begin.

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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