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Morning Outlook

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Overnight Highlights

·         Dollar trades a wild night, making new 9-year highs before giving way to profit taking, trading lower at this hour. The volatility followed a surprise move by Switzerland to scrap its 3-year old cap on the franc against the euro, causing the euro to break hard at one point.

·         Crude oil saw follow-through buying from Wednesday’s late recovery when money started flowing back into the broader commodity sector, with prices trading as high as $51.27 per barrel.

·         The results of an Egyptian snap tender to buy wheat for late February shipment are expected this morning. U.S. wheat was expected to be offered, but not to be competitive.

·         Strategie Grains raised its estimate of European wheat exports by 77.2 million bushels due to reduced supplies from Russia. European wheat is well-priced to capture the business.

·         Export sales for the week ending January 8 totaled 33.2 million bushels of corn (good), 10.8 million bushels of grain sorghum (strong), 41.6 million old- and 11.2 million new-crop soybeans and 13.9 million bushels of wheat (weak).

·         The National Oilseed Processors Association is scheduled to release its December soybean crush total for its members today. A Reuters survey of trade participants reveals expectations that it will peg December crush at 166.9 million bushels. Considering overall crush capacity and an extra day in December this year I submitted an estimate of 171.1 million bushels. The previous monthly record was 165.4 million in December of last year.

·         The Continuous Commodity Index is bouncing off major trend line support off its 2001 and 2008 lows, providing a lift for the broader commodity sector.

·         There is even stronger model consensus this morning for good rains in central and northern Brazil in the 6- to 15-day period.

·         Rain chances increase for drier areas of southwestern Argentina, while wetter areas dry out.

·         Moisture potential improves in the 6- to 10-day for drier areas of the Plains winter wheat belt.

Commodity Weather Group Forecast

In the U.S., showers were confined to the southern Delta (.10 to .35”) yesterday. Milder/mainly dry conditions persist through the weekend. Most models are more supportive of a storm next week in the Plains, Delta, and Midwest wheat areas, which could produce some beneficial moisture and possibly add more protective snow cover to the C. Plains and Midwest wheat.

Colder trends continue in the 6 to 15 day, but coldest model runs still keep subzero readings over snow-covered areas of the Midwest. Rains in the Delta in the 6 to 15 day are mainly beneficial, as the current drier pattern has allowed wet fields in the south to drain favorably. The 16 to 30 day remains cold, keeping winterkill risks higher than normal for Plains/Midwest wheat.

In South America, scattered showers favored parts of Rio Grande do Sul, eastern Santa Catarina, eastern Sao Paulo, and south-central/east-central Mato Grosso in Brazil yesterday. Southern and far northwest areas remain most favored in the near-term, with better model agreement today on the expected upturn in rain for all but far northeast Brazil in the 6 to 15 day as the GFS has trended closer to the preferred Euro model.

This will leave only 15% of corn/soy/sugar notably dry, while nearly 1/2 of coffee could miss much of the rain. The CFS is drier in the north for February and closer to our outlook, which would aid fieldwork for soy/safrinha corn but hinder softs (particularly coffee) given long-term rain deficits.

Light Argentine showers in eastern Buenos Aires were unexpected yesterday, but rains otherwise were limited to the far north. Showers tonight/tomorrow and again late this weekend are increasingly likely to reach drier southwest corn/soy. Rains otherwise favor the far north/west over the next 10 days, giving most of the wettest spots in the heart of the belt a needed break.

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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