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Morning Outlook

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Overnight Highlights

·         The European Central Bank made no changes to its interest rates this morning, as expected. However, it is expected to unveil its new quantitative easing stimulus program in a news conference at 7:30 a.m. CST.

·         China has been making moves to reduce its government grain reserves due to the high cost of maintaining them, but now it is expected to ask local governments to increase their reserves to head off long-term food security concerns. The new plan would hold the governor of each province responsible.

·         The Canadian dollar dropped more than 2% Wednesday to nearly 6-year lows after the central bank unexpectedly cut its key interest rate from 1% down to 0.75%.

·         USDA’s weekly export sales data release will be delayed one day to Friday morning due to the holiday on Monday.

·         Rains are expected to expand across northern Brazil over the next several days, and again late in the 6- to 10-day into the 11- to 15-day period.

·         Colder 11- to 15-day is unlikely to damage Midwest wheat.

·         The dollar pulled back in profit taking ahead of the ECB stimulus announcement overnight, resulting in broad-based buying of the commodities.

·         Overnight rallies have been difficult to sustain in day trade over the past couple of weeks.

Commodity Weather Group Forecast

In the U.S., significant snow/rain in TX/OK produced .25 to 1” precipitation amounts. The storm will push across the South over the next 2 days. The moisture will benefit the northern Delta wheat and should not be heavy enough to damage wetter areas in the southern Delta and Southeast.

The S. Plains could see showers late in the 6 to 10 day further improve soil moisture. Those showers will also favor the Delta/Southeast, but wetness damage is again unlikely. Midwest precipitation is limited to light snow showers in the next 2 weeks. The overnight GFS had a very strong cold air outbreak later in the 11 to 15 day capable of winterkill in the Midwest, but no other model is nearly as cold. Winterkill threats remain rated very low.

In South America, showers scattered across central/eastern Mato Grosso, southwest Goias, eastern Sao Paulo, and far southeast Minas Gerais in Brazil yesterday. Daily scattered showers gradually fill in across northern areas through early next week, with another surge from late in the 6 to 10 into the 11 to 15 day.

The rains should aid crop development in all but far northeast Brazil (mainly Bahia) and will begin to curb recent highs near 100°F in parts of central Brazil. Northern coffee areas will be short-changed more than corn/soy/sugar areas but still see some benefit. CFS guidance trended much wetter for central/northeast areas (mainly coffee/sugar) next month but is probably too aggressive.

Wettest areas in Argentina (far northern Buenos Aires/eastern Cordoba/Santa Fe/Entre Rios) see a break until the middle of next week and then another until early in the 11 to 15 day to allow some improvement. Showers in the next 5 days will aid drier far southern corn/soy. The GFS remains quite hot in the 6 to 15 day, but the much cooler Euro is still heavily preferred given model biases.

Shower Potential Continues to Increase in FSU Wheat for Next 2 Weeks. Shower expansion across Ukraine in the next 10 days should improve low soil moisture supplies to aid spring growth.

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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