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Morning Outlook

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Overnight Highlights

·         The International Monetary Fund made the steepest cut in three years to its global growth outlook.

·         China’s 2014 economic growth came in at 7.4%, which was slightly above expectations, but still the slowest growth since 1990.

·         Crude oil prices fell on the above factors, while the dollar rallied. Commodities as a whole did not fare well amid the overnight news of sluggish global demand.

·         Soybeans dropped to nearly three-month lows overnight on early signs of slowing demand from China.

·         Forecast continues to call for good rains over all but the northeastern 10 to 15% of Brazil’s corn/soybean belt this week, with those areas seeing increasing chances in early February.

·         Weekend rains exceeded expectations in Argentina, but they should be limited this week, limiting problems from excessive moisture.

·         Showers are likely to benefit drier areas of the southwestern Plains this week.

Commodity Weather Group Forecast

In the U.S., rains (.25 to 1.5”) favored the Pacific Northwest and Carolinas over the holiday weekend. A storm will push across the South this week, providing the southwest 1/3 of Plains wheat with beneficial moisture. The rains in the southern Delta and Southeast are not expected to be enough to cause wetness problems outside of southern GA. 6 to 10 day snow showers will be limited to the Midwest, while the South dries favorably.

Possible 11 to 15 day rains in the Delta would be mainly beneficial and favor drier areas. Pacific Northwest wheat areas are drier in the next 2 weeks but are in good shape after weekend showers. Most models have backed away from a strong Midwest/Plains cold pattern, lowering winterkill risks.

In South America, weekend showers favored much of Rio Grande do Sul and Santa Catarina in Brazil but also scattered into southern/western Parana, central Mato Grosso do Sul, northern/eastern Mato Grosso, and northwest Goias. Showers will expand over the next 10 days to reach all but Bahia and northern Minas Gerais, although showers will be more limited in Parana this week than expected.

The rains will be welcome to aid corn/soy/sugarcane growth, including recently hottest spots (near 100°F) along the Sao Paulo/MGDS border. This will leave the northeast 10 to 15% of corn/soy/sugar and 1/2 of coffee driest, but guidance is starting to show better support from the Tropical Pacific for showers to possibly increase around the start of February for these areas.

Argentine showers favored northeast Cordoba, northern/central Santa Fe, northern/western Entre Rios, northeast La Pampa, and northern Buenos Aires over the weekend. This was more than expected, but rains should be more limited this week for wet central/northeast areas. Rains are aiding drier southwest corn/soy.

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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