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Morning Outlook

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Overnight Highlights

·         This has been the week of the central bank, with the European Central Bank setting the pace by unveiling a larger-than-expected stimulus program.

·         Central bank moves around the world have sent money to the bond markets, with currencies falling on increased supplies.

·         The exception is the United States, where next week’s meeting of the Federal Reserve is expected to highlight that the U.S. economy is growing and moving in the opposite direction of most other economies.

·         The result has been a stampede of world investors to the U.S. dollar, with the greenback surging to new 11-year highs after trading more than a 3,000 point range in the past two days.

·         The rush to the dollar increased overnight after King Abdullah of Saudi Arabia died last night, raising fears that his loss, combined with yesterday’s fall of Yemen’s government, will further destabilize the Middle East.

·         The above factors are leading to money flowing out of the broader commodity complex on fears that they will lead to reduced demand for U.S. commodities. The exception was the energy complex, which added a modest risk premium.

·         Corn and soybean futures dropped 1 to 2 cents and soybeans were down 6 cents on the broad-based selling overnight.

·         Northern Brazil will be wettest the next few days, and again late in the 11- to 15-day period, with far northeastern areas missing out as originally expected.

·         A colder pattern in the 11- to 15-day period raises a limited winterkill risk for Midwest wheat.

·         On a positive note, interest appears to be picking up from Brazilian wheat buyers over concerns about the quality of the Argentine crop.

·         China imported 2.6 million metric tons or 102 million bushels of corn in 2014, down 20% from the previous year, with roughly 40 million bushels coming from Ukraine.

Commodity Weather Group Forecast

In the U.S., rains fell across the southern 1/2 of the Delta (.25 to 1”, locally 2”) yesterday and will produce similar amounts in the Southeast today. The rains were too light to improve low soil moisture in the northern Delta wheat but were also not heavy enough to damage wetter areas in the south.

The next storm will be similar and offers some beneficial moisture to the S. Plains in addition to favoring the southern Delta/Southeast, but only limited relief is expected for the drier northern Delta. Midwest precipitation is likely limited to light snow showers over the next 2 weeks. The GFS still has cold air in the 11 to 15 day capable of winterkill in the Midwest, but winterkill threats remain very limited given a lack of support from the ensembles.

In South America, showers scattered into western Mato Grosso, northern Mato Grosso do Sul, southern Goias, southern Minas Gerais, and northern Sao Paulo in Brazil yesterday. Similar showers are expected in much of the north through early next week, with rains then focusing on central/southern areas until late in the 6 to 15 day. Bahia/northern Minas Gerais/Espirito Santo are most likely to still see limited showers, but the bulk of northern Brazil crop areas will at least see temporary relief. This should allow late soy development to finish up with only patchy dryness issues, and many sugar/coffee should see stress ease a bit for the time being.

Argentina showers favored southwest Cordoba, eastern La Pampa, and far southwest Buenos Aires yesterday, aiding a few drier patches. Showers continue to scatter across the south/west into early next week, but the 6 to 10 day has turned wetter in the heart of the corn/soy belt. This may keep a few extra wet spots in areas of eastern Cordoba, Santa Fe, Entre Rios, and far northern Buenos Aires that were quite wet earlier this month.

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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