Home Market Market Watch Sunday Outlook

Sunday Outlook

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Weekend Developments

* Opening calls are slightly lower in grain and oilseeds on continued open harvest weather and improved global weather.

* Hong Kong shares finished the week on a two-month high on hopes for more stimulus moves by Beijing and growing expectations that the US won’t raise interest rates this year.

* Commitment of traders report Friday showed that as of Oct 13th speculators reduced their net long ownership of the US dollar to the lowest level in more than a year. Reducing the long position to $18.97 billion. Further evidence that the dollar ownership has gotten long in the tooth and there could be a global currency rebalancing trying to develop.

* The Friday COT report also showed that as of Oct 13th, speculators reduced their net short position of soybeans by 24,555 contracts to 5,386 – increased their net short of wheat by 4,778 contracts to net short 59,149 – and cut their net long corn position by 29,294 to 22,771 contracts.

* The market is anticipating Monday’s crop progress report to show soybean harvest past 74% and corn beyond 55% complete. After 60% complete harvest, hedge pressure should ease other than localized areas dealing with storage issues.

* Corn support for Monday is Friday’s low after finding bargain hunters to finish Friday in the green and $3.66 Dec below Friday’s low as next support.

* Soybean support for Monday is nearby at $8.95 and deeper support at $8.80. Soybeans will look to Chinese buying in upcoming weeks for support. Soy meal will be the driver of the complex for strength to be sustained. The daily continuation soy meal will fill a gap left from the expiration of the October contract at $309, strength could likely return upon filling that gap.

Commodity Weather Group Weekend Summary

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In the U.S., the weekend has been mainly dry. Widespread frost in the Midwest/far northern Delta was too late to cause damage of significance. Rains spread across the Plains hard red wheat belt starting at mid-week, leading to much improved moisture for fall establishment by Friday. Light showers benefit soft red wheat in the Midwest in the 6 to 10 day, but there is still a risk for some areas to miss relief in MO. Midwest corn/soy harvest delays will be minor. Delta rains develop by the weekend and could be locally heavy. Most soft red wheat will benefit from needed rains, but late cotton/soy harvest will stall. Another surge of rains in the Delta in the 11 to 15 day could further delay the tail of the harvest. Southeast dryness aids harvest recovery in the next two weeks.

In South America, weekend showers in Brazil were limited but scattered across Santa Catarina, northern/
eastern Parana, southeast Sao Paulo, southern Mato Grosso do Sul, and western Mato Grosso. Showers return to southern wheat areas by Wednesday to Friday, with additional rains in southern Brazil late in the 6 to 10 and again in the 11 to 15 day period. This will continue to threaten some minor wheat harvest delays and quality concerns, but lodging damage should be minimal. Widely scattered showers begin to occur by the weekend in northern Brazil, with the better chances arriving next week. While models are still somewhat split on the extent and intensity of rains in central/northern Brazil coffee/soy/sugar areas, the wetter guidance remains favored based on support from the tropical Pacific (MJO). This will cause some occasional interruptions to increase for sugarcane fieldwork but will ease recent stress on Brazil coffee and encourage soy seeding to increase. Rains will be too late for dryland coffee in Minas Gerais that aborted a bloom after rains in early September, but this will spur a second less productive flowering. Argentina was mostly dry/cool during the weekend, but rain events Monday night, early in the 6 to 10 day, and in the 11 to 15 day should keep corn/wheat stable. Frost in southern Buenos Aires caused little damage risk for wheat, as the cool weather has been delaying the heading period.

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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