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Morning Outlook

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Overnight Highlights

* Overnight trade has corn -1/2, soybeans +2, wheat -3, crude -.80, dollar -.22, gold -1.0 and the Dow -90.

* Quiet grain news and no real big problems developing in South America. World equities are mixed.

* Fed statement on interest rate hikes this afternoon. Trade doubting they will be able to raise rates as aggressively in 2016 as they had previously stated.

* Russia’s Deputy Ag Minister proposed removing export taxes on wheat and implementing them on corn and barley exports.

* EIA report out this morning. Market expects ethanol grind to be slightly lower and a build in stocks. Ethanol futures have rallied continually since Jan 13th helping to repair spot margins.

* USDA will delay weekly export sales report until Friday due to the snow storm.

* China continues to active buyer of Brazil soybeans.

* Yesterday funds bought 2,000 corn, 4,000 wheat and sold 4,000 soybeans.

Commodity Weather Group Forecast

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In South America, showers were limited to far southwest Argentina in the past day, with frontal passages into Friday and again at the same time next week offering the best chances for rain in corn/soy areas. However, our forecast offers little relief for the driest 20% of the belt (central/northeast Buenos Aires, central Cordoba, and bordering sections of Santa Fe), and there is the chance for a few additional spots in Santa Fe to see recent moisture depleted as well to expand concerns slightly in early February. Minor reductions in yield potential are expected, although a lack of heat will mitigate stress to some extent. Brazil showers expanded yesterday and favored northern Rio Grande do Sul, far northern/far southwest Parana, northern/western Mato Grosso do Sul, southern/far northern sections of Mato Grosso/Goias, Tocantins, northern Minas Gerais, and southwest Sao Paulo. Rains will remain active into the weekend for the Center-West, slowing early soy harvest. However, rains still diminish next week, with only a modest uptick in the 11 to 15 day. Rains in both the short-term and 11 to 15 day will further aid sugarcane and the southern 1/2 of the coffee belt. However, wettest weather focuses on northern RGDS, southern MGDS, and Parana during the next two weeks, aiding corn/soy growth in recent dry spots but hindering fieldwork frequently in Parana. CFS 16 to 30 day guidance shifted wetter in Argentina and drier in central/northern Brazil.

In the U.S., rain (.25 to 1.5″) fell in the southeast Delta yesterday. Rains taper off in the Southeast today. A major storm early next week brings rain/snow to the C. Plains/Midwest/Delta. Wetness threats to wheat are likely to be limited, with the greatest risk in the northern Delta. However, recent dryness has helped to drain most fields. A cold push late next week is unlikely to cause winterkill, as snow early next week protects wheat in the C. Plains and northern Midwest.

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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