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Sunday Outlook

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Weekend Developments

·         European leaders cancelled a meeting today, which was primarily for working out the details of a Greek exit from the Eurozone. That was the reprieve Greek Prime Minister Tsipras needed.

·         However, that was the end of the good news for Tsipras. European finance ministers held an emergency meeting in Brussels where they essentially told Tsipras that time had run out and that they no longer trust him or his government. As such, they told Greece that no aid would be released until/unless the Greek Parliament implements terms stricter than those rejected by voters a week ago into law by Wednesday of this week.

·         Tsipras may have to form a new coalition government, or perhaps even hold new elections. The clock is running down for Greece to make a necessary debt payment to the European Central Bank on July 20, with its banks on the cusp of failure.

·         Euro leaders want to see Greece’s parliament put into law measures to raise sales taxes, cut pensions, change the bankruptcy code, safeguard the independence of the statistics office and make spending cuts automatic if the budget misses its target, according to papers presented to leaders. The clock is running down for Greece. Creditors also demand the right to return to Greece with Tsipras with full access to government ministers and veto power over relevant legislation.

·         Furthermore, Euro leaders are demanding that Greece transfer as much as 50 billion euros ($56 billion) worth of government assets to an independent company that would sell them in return for additional aid. They are also asking the Greek government to fire workers Tsipras hired in defiance of previous bailout commitments.

·         The euro is under pressure this evening on the global currency market, providing modest support beneath the dollar at this hour. Movement of the dollar over the next several hours could have a significant impact on grain and oilseed prices as we head through the night and into tomorrow’s session, with currency traders closely watching for a response from the Greek people, and more importantly Greece’s parliament.

·         USDA held its corn and soybean yields unchanged Friday as I warned that they could, considering their methodology for determining yields for the July report. The agency’s yield estimates from this point forward will be based on actually walking the fields and surveying producers, but to this point they have been based on crop ratings and their yield model.

·         However, the trade chose to focus on USDA’s tightening of the old-crop stock estimates for corn and soybeans, pushing prices higher following the report’s release. It concerns me though that the post-report rally lasted less than 30 minutes for November soybeans before prices started to slide lower off session highs into the close.

·         November soybeans need to quickly take out the recent high at $10.40 per bushel or succumb to additional downward pressure, with traders believing that August is the critical month for the crop. Sinking soybean prices wouldn’t make gains in corn impossible, but more difficult. I remain friendly soybeans long-term based on the belief that damage in the southern Midwest is extensive and will lead to considerable disease problems as well, but historically such conditions do not get traded until August/September.

·         Eastern areas of the Midwest will likely continue to face pressure from saturated soils through the next 10 days, before rains lighten some in the 11- to 15-day period. Rains develop in northwestern areas of the Midwest later this week to aid developing dry areas, before spreading across much of the Midwest in the 6- to 10-day period.

·         Heat is expected to build into region, with mid-90s to low 100s F over the southwestern quarter of the belt the next three days. Temperatures then moderate, but Kansas and Nebraska will likely remain in the 90s for much of the remainder of the week, with another spike in those states next week to stress corn pollination.

·         Northern and eastern Canadian wheat and canola areas are favored for showers over much of the next two weeks, limiting dryness to the southwestern third of the belt, where additional yield-reducing stress is expected.

·         Heat spikes along with limited rainfall over Europe is expected to keep pollinating corn under stress in France, Spain and Hungary.

·         The India monsoon is expected to remain weak over the next 10 days, keeping stress on groundnuts and southern soybeans.

·         Showers are benefiting wheat in southern and eastern Australia, while growth in wheat in western areas continues to be hampered by moisture stress in the early spring period.

·         Heavy rains in Southern Brazil threaten wetness problems for wheat and the southern third of the safrinha corn crop.

Commodity Weather Group Weekend Summary

In the Midwest/South, rains over the weekend have concentrated in the south half of the Midwest with heaviest activity in S. IA, NE MO, C. IL, C. & S. IN. Rains linger in OH today with another shower system to drop across the E. Midwest early this week. The SW 1/4 of the Midwest sees mid-90s to near 100 for the next 3 days with lingering 90s in NE/KS much of the week. The heat should then ease in the area over the weekend but another spike in NE/KS next week could lead to some corn pollination stress.

Rains in the NW Midwest later this week will aid corn/soy where some dry pockets have developed. 6 to 10 day showers remain active across much of the Midwest and still fall in excessively wet areas of IN/OH but should see lesser amounts by 11-15 day. MO/SW IL should see drier conditions ease wetness. Heat (90s to lower 100s) and mainly dry conditions in the Delta over the next 2 weeks are likely to lead to developing areas of moisture stress for corn/soy/cotton but Southeast shower activity is likely to increase over the belt in the next 2 weeks averting stress.

In the Plains/Canada, showers were scattered over the weekend in C. Alberta, C. & SE Saskatchewan, S. Manitoba, northeast ND, MT, northwest MN, eastern KS, and southern NE. Showers favor northern and eastern Canadian spring wheat/canola areas over the next 2 weeks and ease moisture stress after recent yield loss. At least the SW 1/3 of the belt could still miss the bulk of the rains and see further significant yield loss.

Showers in the N. Plains spring wheat over next two weeks should keep most of belt favorably supplied with moisture for filling with dryness limited to SW fringes of the belt. Heat in the area next week is too late to cause significant damage for the crop but will enhance protein content. Winter wheat harvest delays will be very limited.

 

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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