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Morning Outlook

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Overnight Highlights

·         European leaders now fear that last weekend’s anti-austerity vote in Greece will impact the presidential election in Italy on Thursday.

·         They fear that the Greek vote may have been the first step in a move that could cause the Eurozone to fall apart long-term, which is bearish for the euro.

·         Meanwhile, the dollar is weaker on profit taking this morning as the Federal Reserve begins two days of policy meetings.

·         The Fed is expected to release its updated monetary policy statement at 1 p.m. CST Wednesday, with possible significant implications for the dollar and money flow either in or out of the broader commodity sector.

·         Washington economists, with no input from farmers, put together estimates of the following year’s crop supply and demand balance sheets for budget purposes each November/December. These numbers frequently become the foundation for USDA’s Outlook Forum estimates to be released in February, although there are sometimes adjustments.

·         These economists project 2015 corn acreage at 89.0 million, down from 90.6 million in 2014, with soybean acreage up to 86.0 million, up 2.3 million from 2014. They put the 2015 corn yield at 165.8 bushels per acre, with soybeans at 45.0 bushels. As for 2015-16 ending stocks, they put corn at 1.959 billion bushels and soybeans at 498 million.

·         Malaysian palm oil prices fell to fresh 6-week lows overnight on slow demand. The weakness weighed on soyoil prices Monday, although prices are bouncing this morning.

·         Trade reports indicate that the first Brazilian soybeans are being loaded for shipment to Thailand. However, it will likely be several more weeks before significant shipments gain momentum.

·         In fact, soybeans found support to start the week on strong soymeal demand, due to the limited availability yet of South American supplies. This could provide the opportunity for a bit more of a correction if the soymeal demand lingers.

·         Expanding rains in central Brazil are expected to shift to drier northeastern areas.

·         Rain potential for dry areas of the Plains winter wheat belt improve this week.

·         Grain and oilseed prices are steady to mixed this morning while looking for direction.

Commodity Weather Group Forecast

In the U.S., light snow was confined to the central Midwest and NC yesterday (1 to 3”). Models have trended wetter in the Plains winter wheat belt next weekend, and as much as 3/4 of the belt could see beneficial amounts add to limited soil moisture supplies. Decent model agreement also exists for more expansive Midwest snow early next week to protect wheat from a strong cold push next week.

Delta/Southeast showers arrive by the weekend and will aid low soil moisture in northern wheat areas but will not be heavy enough for damage in the south. The 11 to 15 day showers do not return to the Delta until late, keeping wetness concerns low. Pacific Northwest wheat may see some more beneficial 11 to 15 day showers.

In South America, showers increased yesterday in central Brazil, favoring east-central Mato Grosso do Sul, northwest Parana, northern/western Sao Paulo, and central/southeast Minas Gerais. Rains will continue to favor central areas and then extend northeast next week to fill in areas with the most notable rain deficits for the month.

While 30-day deficits will remain in many areas given how high monthly normal are, most areas will have adequate moisture to support late soy growth, although early harvest may briefly slow in the 11 to 15 day in the northwest. Coffee/sugar areas will also see concerns ease for now, although a return of drier weather is projected in the north by mid-February.

Argentina picked up showers in mainly northwest/far southeast Cordoba, far southwest Santa Fe, eastern La Pampa, and parts of southern/western Buenos Aires yesterday. Showers scatter into central/northeast areas into Wednesday, but wettest fields in eastern Cordoba, Santa Fe, Entre Rios, and far northern Buenos Aires should otherwise see a quieter pattern until the 11 to 15 day.

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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