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Sunday Outlook

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Weekend Developments

!        Friday’s CFTC report indicated that the speculative hedge funds held record large short (sold) positions in soybeans as of September 9, but yet they only managed to add a 2 to 4-cent risk premium ahead of Saturday morning’s frost event in the northwestern Midwest, with corn sinking a couple cents ahead of the event.

         Saturday morning’s frost event was very similar, if not a bit warmer, to what was forecast on Friday as traders were positioning for it. Losses appear fairly localized relative to the big crops forecast on Thursday.

       A graphic showing Saturday morning’s low temperatures is at the bottom of this update.

      Traders will watch for signs of more significant damage in Monday afternoon’s USDA weekly crop progress report, but the general assumption in the trade is that little has changed on corn and soybean fundamentals, with big crops getting bigger.

      This week is expected to be fairly open for harvest progress where crops are mature, with Midwest showers primarily next weekend, and again late next week.

      Freeze threats appear minimal for the next 30 days as temperatures moderate, suggesting that crops that made it through this weekend should have enough time to finish.

      Big crop years tend to produce the larger yield increases in USDA’s October crop report.

       I see nothing to justify a rally in corn anytime soon that wouldn’t be quickly sold by speculators.

       Wheat is finding an area of value, but sinking corn prices make it difficult to sustain a rally at this time.

Commodity Weather Group Weekend Summary

In the U.S., the coldest spots and most extensive light frost on Saturday morning was in southeast ND, central/far southern MN, northern/west-central IA, and near the NE/KS border. Most of the colder readings came in between 32 and 35 F, with only a few spots dipping closer to 30 F. This was similar to or slightly warmer than our Friday forecast for most areas, and there were no reports of a hard freeze (28 F) that would threaten notable damage to immature corn/soy. There are no other freeze threats in the next 15 days, and even the 16 to 30 day suggests low risks.

Very light showers scattered from southern/eastern IA into the Great Lakes on Friday, with a similar system expected tomorrow. However, the best chances for broader and more notable rain arrive next weekend and perhaps again late the following week. While a few spots in the western Midwest could see a heavier thundershower with the first event, there are no signs of notable wetness concerns through the next 2 weeks, particularly given the lack of more frequent showers. This will aid maturing corn/soy and early harvest.

Weekend rains focused on parts of central LA, southwest MS, and the Carolinas, and there are still wet pockets in the Carolinas. However, rains should be a bit less active starting at mid-week, and the risks for tropical moisture to reach the region late this month have diminished since Friday. The heaviest weekend rain was largely south of West TX cotton, and a similar outcome is likely in the 6 to 10 day to limit quality concerns as more of the crop opens bolls.

Otherwise, occasional showers in Plains hard red winter wheat areas will aid early growth prospects, while gradually warmer weather and limited showers aid spring wheat harvest to the north.

 

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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