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Morning Outlook

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Overnight Highlights

·         Global equity markets came under pressure overnight after China’s Finance Minister suggested that China won’t add stimulus, despite a slowing economy.

·       The world’s two top palm oil producers are in a pricing war that is expected to increase global market share for the edible oil at a time when soyoil supplies are expected to hit record levels.

·      Sinking soyoil prices combined with increasing harvest activity and tumbling cash basis to lead soybean prices to gap lower overnight to new contract lows.

·       Only one widespread rain event is expected in the Midwest over the next two weeks to slow harvest progress.

·       Corn and soybean harvest reports continue to be remarkable, thanks to the mild summer that supported high yield potential.

·        Wheat prices firmed overnight after Egypt bought 2.0 million bushels of U.S. soft red winter wheat in a snap tender over the weekend. The purchase suggests that U.S. wheat is now competitive on the global market following recent losses.

·         The U.S. dollar is down a bit this morning, but still just below 4-year highs on expectations of interest rate increases next year.

·        CFTC data released Friday shows that speculative hedge fund managers still hold small net long (bought) positions in the corn market, while they are adding to record large short (sold) positions in the soybean market.

Commodity Weather Group Forecast

In the U.S., weekend showers reached a little more of the area around the Great Lakes than expected but not as much of the TX Panhandle. Favored areas were in the southwest 1/3 of the TX Panhandle, western/far northeast IA, far southeast MN, central WI, east-central IL, northern IN, northwest OH, much of MI, and central SC.

A few showers will scatter into mainly NE, KS, western IA, and SD on Tuesday/Wednesday, but the only opportunity for widespread Midwest rain arrives late in the 6 to 10 day and early in the 11 to 15 day. This will only briefly slow early harvest, given the otherwise relatively dry and frequently warmer pattern.

Freeze risks remain low through mid-October, allowing nearly all areas to safely reach maturity. Showers in the 16 to 30 day favor the southern/eastern Midwest but do not appear substantial. Harvest interruptions should also be very limited in most of the Delta in the next 2 weeks. Only minor interruptions are projected for the Southeast, but the Euro model does show wetter risks in the 6 to 10 day that need to be watched.

Rains were locally heavy (3 to 9”+) in the southern parts of West TX, and some quality declines/localized losses will occur to open boll cotton (about 40%). However, drier trends will now help to ease concerns, as rains focus a bit farther north in the next week and aid newly seeded Plains winter wheat. Dry spots should be limited to only 10 or 15% of the belt. Northern Plains/Canadian Prairies spring wheat harvest will slow early next week but otherwise moves along well.

FSU Rains to Significantly Improve Moisture tor Wheat Seeding This Week. Dryness has been a problem for over 1/2 of the Russian wheat area. However, good model agreement exists on extensive .50 to 1.5” rains this week that will replenish topsoil moisture and ensure timely seeding in nearly all of the belt.

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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