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Morning Outlook

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Overnight Highlights

·       The dollar continues to surge higher, reaching new 14-month highs overnight. A strong dollar is bearish for the commodity sector.

·         Forecast models are similar to slightly less cold for this weekend, suggesting that frost damage risks are low.

·        The next two days could be quite wet for portions of Nebraska, Iowa, southeastern Minnesota and areas around the Great Lakes.

·         The 6- to 15-day period is wetter this morning, but not enough to create significant harvest delays.

·        USDA’s crop progress report reflected stable corn ratings in the latest week, with our yield model going up another 0.3 bushel to 173.0 bushels per acre.

·       Soybean crop ratings crept slightly higher, raising our yield model another 0.3 bushels as well.

·        Spring wheat ratings continued to decline and are now near the 10-year average for final ratings.

·        Both the December corn and November soybean contracts are trading just above contract highs this morning as we approach Thursday morning’s USDA crop report.

·        A Reuters’s survey pegs the corn crop at 14.288 billion bushels on a yield of 170.7 bushels per acre, with soybeans at 3.883 billion bushels on a yield of 46.3 bushels per acre.

·        Germany reports that its wheat quality is much better than expected, with little damage to quality due to persistent rains at harvest.

Commodity Weather Group Forecast

In the U.S., scattered showers occurred in mainly northwest/east-central IA, northern IL, central/southeast GA, and the Carolinas in the past day. The wettest Midwest conditions remain in the next 2 days, favoring eastern NE, IA, far southeast MN, and areas near the Great Lakes. However, some light showers will also be possible Friday/early Saturday in the upper Midwest, and occasional showers were added to the southwest Midwest in the 6 to 10 day and the central/southwest in the 11 to 15 day.

None of these areas appear particularly wet enough, but the most frequent rain chances will shift to MO/KS. Interruptions to Delta harvest will occur Thursday/Friday and intermittently in the 6 to 15 day, but none of this activity appears excessive or particularly widespread. The Southeast will see wetter conditions linger in the next week but then dries starting in the latter 1/2 of the 6 to 10 day.

A strong cold shot on Friday/Saturday mornings (30s in the northwest Midwest) may still lead to light frost in far northern IA and near the MN/WI border (very spotty farther west), but the risk of a damaging hard freeze is very low. There are no other major frost risks apparent into early October, with 16 to 30 day harvest interruptions most likely in the southeast OH Valley and TN Valley.

Accumulating snow (several inches) reached mostly minor production areas in west-central Alberta yesterday and should melt fairly quickly to limit damage threats. Lingering rain showers in the southeast Canadian Prairies and into MT/SD/MN will diminish after mid-week. Limited showers will otherwise aid harvest this month, although cool weather may hang on until the middle of next week to slow drying.

S. Russia Sees Scattered Showers Yesterday But Taper Off Later This Week, as Drier Pattern Returns. Rains (.25 to 1.25”) yesterday covered 30% of the wheat area and should linger today before ending. This will improve planting conditions in the region, but follow-up rains will be essential to fill in dry spots and sustain growth.

Morning Market Snapshot

 

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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