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Morning Outlook

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Overnight Highlights

·         This morning’s monthly jobs report is expected to show that the economy created 240K jobs in December, down from 321K in November, but still a good number. The unemployment rate is expected to come in at 5.7%, down from 5.8% the previous month.

·         U.S. stock futures turned lower overnight ahead of the report following two days of big gains.

·         Both the dollar and crude oil are modestly lower following a quiet night of trade.

·         Today will be the second of five days of index fund portfolio rebalancing. The biggest impact was seen in the beef sector, as was expected, but at least now traders have a better feel on what to expect.

·         USDA will release its highly-anticipated January crop report known for its surprises Monday at 11 a.m. CST. This report probably has more uncertainty associated with it than any report in many years, especially for corn.

·         Corn and soybean basis bids are steady, with dealers reporting very light farmer selling ahead of Monday’s USDA report.

·         Asian millers are said to be backing away from the wheat market due to “high” prices.

·         South Korea’s largest feedmaker has issued a tender to buy up to 22 million bushels of corn on the world market, providing support for this morning’s feed grain market.

·         Another group of South Korean buyers bought 4.8 million bushels of optional origin corn on Thursday.

·         This follows a purchase by a third South Korean group of 15.4 million bushels of corn.

·         The demand is being stimulated by lower corn costs, combined with expectations of falling ocean freight rates.

·         China’s grain imports could plummet this year as the government pushes as much of its massive grain reserves as possible onto the domestic market before it grants permission for end users to buy overseas supplies.

·         Currently China is reportedly granting import quotas to grain companies who are heavy buyers of reserve grain.

·         Brazil’s CONAB (equivalent of our USDA) raises its soybean production estimate to 95.9 million metric tons, up slightly from 95.8 mmt in December and above USDA currently at 94 mmt.

·         CONAB pegs its corn crop at 79.1 mmt, up from 78.7 mmt in December and up from USDA’s latest estimate of 75 mmt.

·         Confidence inches higher for late January showers in northern Brazil that would keep production prospects high.

·         Midwest winterkill damage limited to northeast quarter of belt tonight.

Commodity Weather Group Forecast

In the U.S., snow showers scattered across the Midwest yesterday, with generally less than 2” accumulations. Lows tonight should fall to -5 to -10°F in the northern 1/2 of the Midwest wheat, but snow cover is now 2 to 4” in most areas which will limit damage risks to mainly northern OH. Models trended colder next week in the Midwest but put down more snow in the eastern Midwest, which should minimize damage threats.

Delta wheat continues to be favorably dry, with only light rains early next week and any additional potential wetness concerns not likely until late in the 11 to 15 day. Plains wheat winterkill risks remain minimal in the next 2 weeks. The models continue to give the southern half of the belt some light showers in the 1 to 5 day, with the potential of more significant rains in the 11 to 15 day that would be beneficial to the southern 1/3 of the belt.

In South America, scattered showers were not widespread but did occur in the Mato Grossos yesterday, while favored areas were in western Parana, Santa Catarina, and northern Rio Grande do Sul. While rains still favor the south for most of the next 10 days, the chance for more scattered showers was added to the Mato Grossos.

There are still drier 11 to 15 day forecast solutions, but guidance has gradually become more supportive of showers returning to northern Brazil. Confidence has inched slightly higher as a result. While long-term deficits could still be a concern for coffee/sugar, the showers would be beneficial to corn/soy and may reach all but far northeast areas by the end of the 15-day period.

Argentine rains return Sunday night to the northeast 3/4 of corn/soy, with an active pattern continuing into the 6 to 15 day. Any dry spots should be limited to the far southwest, while heavy rains at times next week in the north should focus outside of main production areas.

South Russia Very Cold Overnight, But Snow Cover Protected Nearly All of the Wheat. Snow cover was mainly 3 to 5” in South Russia, limiting damage to less than 10% of the belt from impressive lows of mainly -10 to -20°F last night. Temperatures moderate and snow cover increases in the next 2 weeks to end threats.

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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Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY® | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

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