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Morning Outlook

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Overnight Highlights

·         Shock waves continue to reverberate through the global markets after Switzerland removed the cap on the franc relative to the euro on Thursday, with the euro continuing to lose value and stock values lower as well. The dollar remains just below Thursday’s 11-year high.

·         Fund managers are also keeping close watch on another hostage situation in Paris this morning.

·         Brazil’s real is near a one-month low, providing incentive for producers there to sell soybeans as the big harvest starts.

·         U.S. wheat wasn’t even offered in this week’s Egyptian tender because we simply aren’t competitive with the strong dollar.

·         Cheaper ocean freight rate is helping make U.S. corn competitive, with business picking up.

·         Softer soymeal market is drawing business away from DDGS.

·         China will sell 5.1 million bushels of imported wheat from state reserves to ease a domestic tight supply of high-protein wheat. It will also offer 23.2 million bushels of domestically grown wheat from its reserves.

·         Forecast models are similar to even slightly wetter for northern Brazil in the 6- to 15-day period.

·         Plains wheat showers contract to the southwestern third of the belt in the 6- to 10-day period.

·         Corn, soybean and wheat prices once again bounce higher overnight, but the markets have struggled to sustain that strength in day-trade in recent sessions.

Commodity Weather Group Forecast

In the U.S., showers (.10 to .30”) were isolated in the Delta/Southeast yesterday, while showers spread across the Pacific Northwest (.10 to .75”). Additional rains benefit Pacific Northwest wheat this weekend. Models have scaled back rains from the storm later next week in the Plains, Delta, and Midwest, but some beneficial moisture is still possible in the southwest 1/3 of the Plains.

Colder conditions are not intense enough in the 6 to 15 day to pose any winterkill threats to Plains/Midwest wheat. Rains in the Delta/Southeast in the 6 to 15 day are mainly beneficial, with the risk of excess moisture confined to GA. The cold pattern weakens in the Plains in the 16 to 30 day, but Midwest wheat still needs to be watched for winterkill threats.

In South America, showers occurred in mainly northern/western Mato Grosso do Sul, southwest Goias, far western Minas Gerais, northwest Sao Paulo, and southern/far northern Mato Grosso yesterday in Brazil. Showers favor the south and northwest through the holiday weekend but should then creep northward.

The 6 to 15 day is similar to slightly wetter than yesterday’s guidance, with better coverage of central Minas Gerais/Goias. This could miss as little as 10% of corn/soy/sugar and 1/3 of coffee, aiding crop development elsewhere. Our forecast still sides with a return of near to below normal rain in February for northern Brazil, aiding soy harvest/safrinha corn seeding but hindering softs (particularly coffee). However, CFS and Euro model guidance do pose a wetter risk to the forecast, particularly in northeast Brazil.

Argentine showers were limited to the southwest edge of the belt yesterday but still ease dry patches in the south this weekend. While Cordoba is slightly wetter in today’s outlook, most wet areas in the heart of the belt are expected to see needed drying.

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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