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Sunday Outlook

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Weekend Developments

·         Bloomberg reports that European Central Bank staff have presented policy makers with a proposal to initiate a 500 billion euro ($590 billion) asset purchase program to try to avert a deflationary spiral for the euro-zone region.

·         Such a program would be expected to add pressure to the euro on the global currency market, while supporting strength in the U.S. dollar.

·         A survey of large U.S. bankers reveals expectations that the Federal Reserve will boost interest rates at least two times this year, with the first possibly as early as June, further adding strength to the dollar.

·         Speculative fund money has been moving out of the broader commodity complex as the dollar gains value, although it is currently consolidating just above support on the major commodity index charts.

·         The models continue to disagree, but rains are still favored over all but the far northeastern portion of Brazil’s crop belt late-month to avert major crop stress.

·         Widespread weekend rains favored the heart of Argentina’s grain belt.

·         Snow early this week should protect Midwest week from another surge of mid-week cold.

·         Traders are primarily focused on final positioning for tomorrow morning’s 11 a.m. CST USDA crop report, which probably has more uncertainty surrounding it than any report in many years.

·         Keep in mind that the computers will be the first to react to the numbers as they read headlines, followed by the human response as 200 some pages of data are digested. Pre-report trade expectations are as follows:

USDA January 12

2014-15

Quarterly Stocks

Wheat

Corn

Soybeans

billions of bushels

USDA December 1 Estimates

    Pre-Report Estimates

Average Trade Estimate

1.499

11.123

2.590

Highest Trade Estimate

1.585

11.325

2.742

Lowest Trade Estimate

1.400

10.820

2.400

USDA December 1 2013

1.475

10.453

2.154

Water Street Solutions

1.497

11.219

2.622

 

U.S. Yields & Production

2014-15

2014-15

Corn

Soybeans

Corn

Soybeans

Yield in bushels per acre

Production in billions of bushels

USDA January 12

    Pre-Report Estimates

Average Trade Estimate

173.300

47.600

14.349

3.956

Highest Trade Estimate

174.300

48.200

14.554

4.020

Lowest Trade Estimate

171.300

46.800

14.171

3.844

Previous USDA Estimate

173.400

47.500

14.407

3.958

Water Street Solutions

174.100

48.000

14.415

3.994

 

U.S. Ending Stocks

2014-15

Wheat

Corn

Soybeans

billions of bushels

USDA January Report

Average Trade Estimate

0.666

1.927

0.393

Highest Trade Estimate

0.699

2.081

0.452

Lowest Trade Estimate

0.636

1.710

0.355

Previous USDA Estimate

0.654

1.998

0.410

Water Street Solutions

0.668

2.081

0.394

 

Winter Wheat Seedings

2015-16

Total Winter

Hard Red

Soft Red

White

millions of acres

USDA January 12

    Pre-Report Estimates

Average Trade Estimate

42.564

31.023

8.039

3.502

Highest Trade Estimate

44.000

32.115

8.739

3.823

Lowest Trade Estimate

41.000

29.800

7.432

3.200

USDA 2014 Seedings

42.399

30.471

8.498

3.430

Water Street Solutions

43.068

32.115

7.432

3.521

Commodity Weather Group Weekend Summary

In the U.S., showers are spreading across the Delta and continue through tonight, producing (.25 to .75”). A mixture of snow/sleet/freezing rain will cover much of the Midwest wheat through early tomorrow. Ice accumulations should be mainly 1/4” or less, with minimal damage threats. Snow accumulations of 2 to 4” in the northern Midwest should protect most of the crop from subzero readings on Tuesday night. The northern Midwest did dip down to -5 to -8 F on Friday night to cause minor damage, mainly in northwest OH.

The Delta will dry again after today, keeping wetness concerns low. Rains in LA/southern MS in the 6 to 15 day should only lead to isolated standing water. Plains wheat will be free of cold threats. However, rain chances have diminished, and soil moisture deficits will remain (especially in OK). Pacific Northwest wheat sees beneficial showers in the next 10 days.

In South America, weekend rains in Brazil favored Rio Grande do Sul, Santa Catarina, central/far southern Parana, northern Mato Grosso do Sul, and northern/far southeast Mato Grosso and were at or slightly above expectations. Rains will favor the south over the next 10 days, and warm conditions continue (although only low to a few mid-90s in the hottest areas).

Late-month guidance is still not in agreement and keeps confidence limited. While the northeast did shift slightly drier from Friday, rains from the end of the 6 to 10 into the 11 to 15 day could reach better than 1/2 of coffee, most sugarcane, and all but 15% of corn/soy. However, the upturn in showers for northern Brazil remains unlikely to be a prolonged one into February, which could still hinder coffee/sugar.

Notable Argentine rains favored northern/central Cordoba, central Santa Fe, and northern/western Entre Rios. While the southwest 1/4 will see moisture decline, rains were received last week. Flooding risks remain limited to the northeast 10 to 15% of the belt in the next 10 days, with stable conditions elsewhere.

 

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

Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK involved in trading futures and or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL. This information is provided freely and is NOT in the capacity of a trading advisor. NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. Information provided is not to be construed as an offer to sell or solicitation to buy any commodity or security named herein.

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