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Morning Outlook

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Overnight Highlights

* Overnight trade has corn -3, soybeans -3, wheat -2, crude -.56, dollar even, gold +5.7 and the Dow +50.

* Grains lower on cooperative Brazil weather and lower Chinese stock market. Expect choppy trade ahead of Tuesday’s USDA report.

* Weekly export inspections this morning are expecting; Wheat 11-14 mln bu, Corn 19-25 mln bu, Soybeans 42-49 mln bu.

* USDA will release its Jan WASDE report, crop production and quarterly stocks report tomorrow at 11:00am CT.

* Chinese agriculture officials reportedly commenting that China will need to lower corn prices to reduce its large reserves. Some in the trade believe that could occur yet this year.

* AgRural lowered its estimate for the 15/16 Brazil soy crop to 98.7 mln tons from 99.7 mln due to irregular rain in key growing regions.

* Russian wheat prices fell at the end of las week on the renewed weakening of the ruble.

* Friday’s COT report showed Managed Money continuing to load with short positions. Corn short -161,988 (up -25,877), Soybeans short -79,457 (up -16,032), Wheat short -96,143 (up -13,023).

* Friday funds reportedly bought 9,000 corn, 6,000 wheat and were even soybeans.

Commodity Weather Group Forecast

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In South America, weekend rains in Brazil favored southern/western Mato Grosso, Mato Grosso do Sul, Sao Paulo, southwest Minas Gerais, far southwest Goias, Parana, and far northern Rio Grande do Sul. Frequent rains continue through much of the next two weeks in the Center-West and Northeast, aiding late corn/soy growth but beginning to hinder Center-West soy harvest later in the month. With CFS guidance also now trending wetter in Mato Grosso for early February, this will need to be watched for more notable fieldwork delays. However, our expectations remain less aggressive given diminishing support from the tropical Pacific, with rains easing early in the 16 to 30 day. Expanding rains are also aiding coffee/sugar areas in the next ten days. While not completely dry, wetness concerns are easing farther south for corn/soy, with notably wetter weather holding off until the 16 to 30 day. Weekend rains were limited in Argentina, but a heavier pocket (3″) occurred in wet sections of southeast Cordoba (10% of corn/soy). A similar pattern occurs over the next ten days, with a broader event starting late in the 6 to 10 day and again in the 11 to 15 day to aid corn/soy growth. This should keep the main concern for a few wet pockets in the western belt (15 to 20% of corn/soy). Highs briefly rise into the low to mid 90s in the next two days, with a more prolonged event from the weekend through the first 1/2 of next week. However, stress should not be notable.

In the U.S., weekend rains (.25 to 1.25″, locally 2.5″) fell in the Midwest/Delta and changed to snow (1 to 4″) in the western Midwest. Mainly rain showers favor the eastern Midwest next weekend, but the Delta is not likely to see significant rain until the 11 to 15 day. Wetness concerns for wheat are limited. Winterkill risks for wheat remain low, with even the coldest models only threatening scattered winterkill in the northwest fringes of the Midwest in the 6 to 10 day.

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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