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Morning Outlook

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Overnight Highlights

* Overnight trade has corn -1, soybeans -1 1/2, wheat +2, crude -.87, dollar -.18, gold +9.0 and the Dow -50.

* Markets mixed this morning. Pressure from lower outside markets and cooperative South American forecast.

* Report out of China that their Central Rural Work Group plans to institute reforms to move toward a market based corn pricing system.

* Weekly export inspections will be out this morning.

* Friday’s CFTC commitment of traders report showed managed money covering shorts in corn and soybeans. Current corn position -128,210 (off 28,621) and soybeans at -25,773 (off 27,267)

* After trading at its lowest level since June 2002, the CRB Index closed higher for the week yielding a weekly key reversal.

* Cattle on Feed report on Friday had On Feed at 100%, Placements at 99% and Marketings at 101%.

Commodity Weather Group Forecast

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In South America, showers increased overnight in Argentina, with weekend rains favoring La Pampa, southern/far eastern Buenos Aires, northern Cordoba, and central/far southeast Santa Fe. Rain totals of nearly 1″ in the mentioned parts of Cordoba/Santa Fe reached dry spots and linger in the far northeast corn/soy areas today, with additional rain chances later this week (mainly Thursday/Friday) and again at the end of the 10-day period. The remaining dryness in east-central Cordoba, Entre Rios, eastern Buenos Aires, and a few spots in southern Santa Fe are least favored, allowing up to 1/4 of corn/soy to see building stress. A rain event in the 11 to 15 day may scale this back slightly, with showers possible in Entre Rios/far eastern Buenos Aires. Heat has abated but did reach well into the 90s F during the weekend (100s mostly north of the main corn/ soy belt). Brazil picked up weekend showers in mainly Bahia/northern Minas Gerais, but patchy activity also occurred in central Mato Grosso/Goias/Tocantins/central Minas Gerais/northern Sao Paulo. Rains aid much of Brazil this week but expand by later in the week into the Center-West to slow soy harvest. However, good model agreement remains for a southward shift in 6 to 15 day rain to aid fieldwork and move harvest interruptions to mainly Parana. Rains also will become regular again in southern corn/soy areas (first round tomorrow), aiding recent dry spots in Rio Grande do Sul after 90s during the weekend.

In the U.S., rain/snow (.25 to 1.25″, locally 2.5″) covered the Southeast/Mid-Atlantic/northeast Delta over the weekend. Showers this week are confined to the Southeast. A significant storm brings rain/snow to the C. Plains/Midwest/Delta early next week. Wetness threats to wheat remain limited, mainly to the OH River Valley and the Southeast where more rains are likely in the 11 to 15 day. Winterkill threats are low, as temperatures run near to above normal in the next two weeks.

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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