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Morning Outlook

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Overnight Highlights

* Overnight trade has corn -3.4, soybeans -4, wheat -2, crude -1.20, dollar even, gold +9.0 and the Dow -300.

* Lower crude/equities, favorable South American weather and demand concerns pressuring grains in the overnight trade.

* Asian markets continue their anxiety over Chinese economic indicators and are compounded by the test by North Korea of a Hydrogen bomb.

* In another time, drama between Saudi Arabia and Iran would have crude oil soaring – not today as the global market sees a supply glut and demand concerns.

* Brazil export association estimates Brazil will export a record 57 mln mt in 2016 vs 53 mln mt in 2015. 2016 corn exports were estimated at 30 mln mt vs the record 30.7 mln mt in 2015.

* Argentine peso is trading 13.63:1 USD from the recent 13.25:1 USD. Argentine farmer selling has reportedly picked up in recent days helping them to continue to secure the lead price in global export business.

* Global export environment continues to be highly competitive with weak FOB offers across the board keeping pressure on domestic prices and holding shorts content with their positions for now.

* Yesterday funds bought 3,500 corn, 1,500 soybean and 3,000 wheat.

Commodity Weather Group Forecast

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In South America, showers scattered into southern/western Mato Grosso, Tocantins, western/northeast Bahia, northwest Minas Gerais, southern Goias, west-central/far northern Mato Grosso do Sul, and southeast/far northwest Rio Grande do Sul in Brazil in the past day. While a gradual process, the daily showers through mid-month in northern corn/soy will aid soil
moisture and ease stress, which has been impacting about 20% of the belt. While scattered showers may also occur in wet sections of far southern Brazil today and again in the first 1/2 of next week, heaviest totals focus well north of recently very wet areas in RGDS (10 to 15% of corn/soy and nearly 1/2 of rice) and nearby sections of Paraguay/Uruguay/northeast Argentina. However, rains ramp back up in southern Brazil and ease in the north in the final 1/3 of January, allowing wetness
to redevelop for far southern areas but aiding Center-West soy harvest. A few light showers lingered in western Cordoba/central Buenos Aires in the past day. A similar pattern persists this week ahead of a late Sunday to Tuesday rain event, with a broader event also arriving in the 11 to 15 day. The rains should limit dry patches in the east to no more than 15% of corn/soy, with highs peaking in the low to mid 90s next week. Late wheat harvest will slow by the 11 to 15 day in the south. However,
the main concern will be for continued areas of surplus moisture in the western 1/4 of corn/soy in mid to late January.

In the U.S., showers in the past day were only around .10″ in the Plains. Showers develop in the
Midwest/Delta on Thursday, with a second surge on Saturday. The rains will keep wheat fields wet
but should not expand damage from standing water. Dry weather returns for the 6 to 15 day for
most of the area, allowing for more favorable drying. The colder pattern in the next 2 weeks in
wheat areas only poses minor winterkill risks, focused on northwest fringes of Midwest wheat.

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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