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Morning Outlook

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Overnight Highlights

* Overnight trade has corn -1, soybeans -1, wheat -1, crude +.40, dollar steady, gold +3.0 and the Dow +40.

* Grain markets lower on lack of directional news. SA weather not perfect but not bad enough to be a story.

* Global equities generally lower overnight.

* China’s Central Rural Working group says China will cut domestic price of corn to spur demand and reduce cheaper imports.

* EIA reported weekly ethanol production at 961,000 bbls per day, off -22,000 from last week. Ethanol futures prices continued higher. US crude oil stocks were reported at their highest level since EIA started reporting. Oil futures are higher.

* Wednesday funds bought 5,000 soybeans, sold 5,000 wheat and were even on corn.

Commodity Weather Group Forecast

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In South America, showers favored far southwest Cordoba, northeast La Pampa, and central/northwest Buenos Aires in Argentina in the past day. A few lingering showers during the balance of this week appear to be limited to northern/western fringes of the corn/soy, with a front next Thursday/Friday in the far south/west. None of this activity is expected to notably ease current dry spots in central Cordoba and bordering sections of Santa Fe as well as northeast Buenos Aires (20% of corn/soy), and minor reductions in yield potential are projected. However, 11 to 15 day showers may be a bit more generous, and the 16 to 30 day is quite wet on the CFS guidance. Given a similar pattern with tropical forcing (MJO) to one seen in mid to late December, this could help to somewhat improve corn/soy conditions in Argentina by mid-February. In Brazil, scattered showers favored eastern Mato Grosso, northern/western Goias, northern Mato Grosso do Sul, southern/western Minas Gerais, Bahia, and central/eastern Sao Paulo in the past day, including further relief for many coffee/sugar areas. Wet weather will slow Center-West soy harvest into the weekend, but drier conditions next week then aid fieldwork. Fieldwork and transportation delays are expected to be most frequent in Parana during the next 15 days, as a return of 11 to 15 day rain in the Center-West is expected to remain modest. The rain will also aid recently drier corn/soy areas in the far south.

In the U.S., rain (.10 to .50″) fell in southern parts of the Southeast yesterday and taper off today. A
strong storm early next week brings beneficial heavy snow to the Plains wheat but stresses livestock.
Rains in Midwest/Delta wheat should not be heavy enough for damage in most areas. A cold
push behind the storm is weaker in latest model runs and unlikely to cause winterkill. Rains in the
11 to 15 day in the Delta/Southeast wheat should not be heavy enough to be damaging.

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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