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Morning Outlook

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Overnight Highlights

·         Consumer prices were stagnant in April, breaking a streak of four months of deflation. The European Central Bank claims that as progress and a product of its asset purchasing program.

·         Unemployment in the euro-zone held steady at 11.3% in March, according to the latest data released.

·         A Bloomberg survey of market participants reveals that for the first time a majority (52%) believe that Greece will eventually leave the euro.

·         The dollar broke to fresh two-month lows overnight in continued liquidation, breaking below the 100-day moving average.

·         Crude oil rallied to its highest level since December 12 after supplies again build less than expected in data released Wednesday, including a decline in supplies at Cushing, Oklahoma for the first time since November.

·         China is testing a new direct payment subsidy program in agriculture, but it may not be working. Local analysts say that the soybean subsidy is so low ($54 per acre) that soybean acreage by drop by 20% this year.

·         Grain and oilseed prices firmed again overnight as speculative money flows into the broader commodity sector as the dollar tumbles. Traders are monitoring prices relative to key chart levels that could trigger covering of large speculative short positions in corn and wheat.

·         A few showers are drifting across the eastern Midwest this morning, but the planting window is otherwise wide open for the region.

·         A band of organized rainfall is expected to develop early next week from the Central Plains into the southern Great Lakes, with extensive and widespread rains building into Wednesday and Thursday in western areas, drifting south and east into late week.

·         Weekend and early-week rains are expected to significantly increase stripe rust pressure in Central Plains wheat. The disease can capture 40% of yield potential, but many farmers there say that this year’s crop isn’t worth saving.

·         Russia is expected to make a decision by mid-May on lifting its export tax on wheat.

·         Heavy rains across eastern and western Australia raise analyst estimates to 25 million metric tons of wheat, up from 23.61 mmt the previous year.

Commodity Weather Group Forecast

In the U.S., spotty showers were limited to SC/eastern NC/southeast MI/north-central OH/central MT in the past day. Isolated showers in the far eastern Midwest end later today, with only widely scattered activity in the north from weak weekend frontal passages.

A band of more organized rain develops Monday/Tuesday from the C. Plains into the southern Great Lakes, with extensive and significant rains then building Wednesday/Thursday in the western Midwest before scattering south and east late in the week. This will gradually bring an end to the very favorable planting window, but another break is possible in much of the Midwest during the 11 to 15 day.

Fieldwork delays appear most likely from the southwest Midwest in the Delta during mid to late May, while other areas should make good progress. Quality concerns may return later this month for Delta soft wheat, but the near-term break in rain is helping to limit flooding concerns. Heading winter wheat in the Plains will be favored by multiple rain events in the 6 to 15 day, helping to eradicate lingering southwestern dry patches (10% of belt). While not  completely dry, spring wheat seeding concerns in the N. Plains and Canada should remain low.

In South America, rain (.25 to 1.25”, locally 2.5”) was confined to northern fringes of Brazil yesterday and remains so for the rest of the week, aiding soy/sugar harvest. Rains expand quickly for corn areas early next week, aiding pollination and only briefly slowing late soy harvest. Mid-week rains benefit coffee but slow sugar harvest (damage is unlikely).

Argentine rains (.50 to 3”) covered the southeast 1/2 of corn/soy yesterday, with extensive weekend rains to set back harvest further. Dryness next week allows harvest to slowly recover, and 11 to 15 day rains are limited to the northeast 1/3 of the belt.

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

Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK involved in trading futures and or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL. This information is provided freely and is NOT in the capacity of a trading advisor. NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. Information provided is not to be construed as an offer to sell or solicitation to buy any commodity or security named herein.

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