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Morning Outlook

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Overnight Highlights

* Overnight trade has corn +2, soybeans +5, wheat +1, crude -.20, dollar +.40, gold +5.8 and the Dow -110.

* Grain markets higher on stability in Chinese equities and support from the large short fund position in yesterday’s Commitment of Traders report.

* Commitment of Traders report yesterday reported that Managed Money with options are now net short corn -136,111 after adding a startling -53,568 shorts to their position. They are net short soybeans -40,843 and wheat -83,120.

* The new Argentine administration says it is disappointed by the volume of soybeans sold by farms since it reduced export taxes three weeks ago.

* Argentina’s sub-secretary of Ag estimated 15/16 soy crop at 60.0 mln mt vs 61.4 mln mt last season. Corn is estimated at 26.0 mln mt vs 33.9 mln mt for 14/15.

* Monday funds sold 14,000 corn, 5,000 soybeans and 5,000 wheat.

Commodity Weather Group Forecast

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In South America, scattered showers covered Mato Grosso, Goias, Tocantins, central/eastern Bahia, northwest Minas Gerais, central/northeast Mato Grosso do Sul, northwest Sao Paulo, and southwest Rio Grande do Sul in Brazil in the past day. Frequent rains through mid-month in northern Brazil will end stress that has been occurring in about 20% of the northern corn/soy. A return of 6 to 15 day rain to coffee/sugar will further aid moisture supplies, with the rains needed most in Robusta coffee areas. Wet fields in RGDS and adjacent sections of Paraguay/Uruguay/Argentina should avoid the heaviest totals in the next ten days, but intermittent showers will slow drying following the wet finish to December. Fungicide applications will remain important in the south 1/3 of Brazil soy to control rust. Showers scattered into northern/far southern Buenos Aires, southern Entre Rios, far southwest Santa Fe, and western Cordoba in Argentina in the past day, including recently drier pockets. Showers will be most frequent in far western areas over the next 15 days (particularly Cordoba), keeping surplus
moisture concerns in place for up to 1/4 of the belt. However, amounts are not expected to be heavy enough to add to flooding concerns after heavy weekend rain in southeast Cordoba, and only minor wheat harvest delays are anticipated to the south in the 6 to 15 day. Any lingering dry patches in Santa Fe/Entre Rios should only encompass 10 to 15% of the corn/soy.

In the U.S., precipitation was minimal in the past day. Showers develop in the Midwest/Delta from
Thursday into early Saturday. Amounts are still too light to exacerbate wetness. Dry weather returns
for the 6 to 10 day, allowing for more favorable drying. Stronger cold air surges arrive in the 6
to 15 day, but minor winterkill threats are limited to the northwest fringes of Midwest wheat. 11 to 15
day rains are scaled back in Delta wheat, keeping further wetness threats low.

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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