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Morning Outlook

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Overnight Highlights

* Overnight trade has corn -1/4, soybeans +1/2, wheat -5, crude +.67, dollar +.30, gold -3.0 and the Dow +100.

* Markets mixed after yesterday’s “un-bearish” report and wheat seedings surprise. Funds will have to decide if they want to defend their huge short position or if the story has run its course for now as spring seasonals come to play.

* Generally higher global equities and energy overnight.

* China imported 9.12 mln tonnes of soybeans in December, the second highest monthly level on record and taking 2015 imports to a record high of 81.69 mln tonnes.

* FranceAgriMer sharply raised its monthly forecast for French soft wheat stocks as it cut its expectations for exports both within and outside the EU.

* South Africa’s corn imports are expected to be the highest in 23 years after the crop devastation from the worst drought in three decades.

* Bloomberg noted that during the weakest commodity market in 25 years, China bought a record amount of crude, iron ore, soybeans and copper concentrate last year. Crude imports increased last year by 8.8 percent. Needless to say, China sees everything on sale and is buying.

Commodity Weather Group Forecast

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In South America, scattered showers occurred in northern/eastern Mato Grosso, western Tocantins, eastern Goias, western Bahia, and northern/eastern Minas Gerais in the past day in Brazil, but notable rains favored central/northeast Sao Paulo and western Minas Gerais. Highs rose into the mid 90s in western Rio Grande do Sul, but stress was limited given abundant soil moisture as heat eases today. Rains will aid late corn/soy growth in the Center-West in the near-term but will also increasingly slow early harvest. However, the heaviest totals mainly focus on the northeast 15% of the belt (Minas Gerais/Bahia/Tocantins/Goias). Rains significantly enhance moisture for coffee/sugar in the next two weeks as well, including pockets of heavy rain (up to 8″) in Minas Gerais in the next ten days. This may threaten some localized flooding but will still be a net benefit, as rains are particularly needed in Robusta coffee areas. Southern showers remain limited until at least the 11 to 15 day, easing wetness concerns further. Argentina picked up a few showers in western Cordoba, northern Buenos Aires, and far southern Santa Fe in the past day, but heavier rains were limited to northern Entre Rios/northern Santa Fe/Santiago del Estero. Pockets of surplus moisture in the west will remain a minor concern for 15% of corn/soy, while a widespread 11 to 15 day event aids growth in most of the belt. 90s from this weekend through the middle of next week threaten only minor stress.

In the U.S., snow (1 to 3″) lingered in the eastern Midwest yesterday. Showers in the eastern Midwest/
Delta on Friday are very light, with the next significant event developing in the latter 1/2 of next week. Plains showers are light, with more significant moisture in the Midwest/Delta. For now, wetness threats for wheat are likely to stay isolated. Despite cold pushes in the next two weeks, winterkill risks for wheat remain low as threatening cold is limited to snow-protected fields.

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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