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Morning Outlook

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Overnight Highlights

· Overnight trade has corn +2, soybeans +6, wheat +1, crude +1.50, dollar +.33, gold even and the Dow +200.

· Grain markets higher this morning on strong equity markets and rally in crude prices. Funds continue to cover shorts.

· Export sales report: corn 45.7 mln bu (very good), soybeans 36.2 mln bu (good), wheat 13.3 mln bu (good).

· AGR Latam is maintaining its estimate for the Brazilian soybean production at 101.1 mt.

· Cash soymeal values continue to firm. Values up $1 to $2.

· Thursday funds bought 7,000 soybeans, 3,000 wheat and sold 5,000 corn.

· USDA will release its monthly Cattle on Feed report this afternoon.

Commodity Weather Group Forecast

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In South America, showers favored far northern Goias, southern Tocantins, central/northeast Bahia, and a few spots in northern Minas Gerais in Brazil in the past day. Rains remain similar through the weekend, with expanding rains in southern/western Brazil in the 6 to 10 day. While much of the guidance still supports 3 to 6″ rainfall or more in Mato Grosso in the 6 to 10 day, our expectation is that this is still much too aggressive. Early soy harvest will slow next week in Center-West Brazil,
but support is building for drier conditions in the 11 to 15 day and beyond. Rains also return next week to Rio Grande do Sul corn/soy to recharge soil moisture after the drier pattern thus far this month, and the current heat in the region (90s) will also moderate. Rains continue into February in the south, aiding late growth but occasionally slowing harvest in Parana. Drier conditions begin to return to coffee areas next week, but recent rains have eased stress for now. Argentina picked up showers in southern Buenos Aires/La Pampa in the past day. Temperatures (currently mid 90s to near 100°) will moderate and rains expand in 1/2 of the belt on Sunday/Monday. However, this event is less extensive than yesterday. While this will scale back dryness (1/3 of corn and soy currently) to 20% of the belt, reduced yield potential is possible in southeast Santa Fe/southern Entre Rios/northeast Buenos Aires. The 11 to 15 day outlook is wetter but still may leave drier patches in the east.

In the U.S., rain/snow (.25 to 1.5″, locally 2.5″) covered the Delta yesterday. Similar rain/snow
covers the Southeast/Mid-Atlantic through tomorrow. The next significant storm comes early in the
11 to 15 day, with widespread rain/snow in the C. Plains/Midwest and showers later in the period in
the Delta. Wetness threats to wheat remain limited, as heaviest activity stays north of the wetter
soft wheat areas. Winterkill threats remain low in the next two weeks, as a milder pattern develops.

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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