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Morning Outlook

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Overnight Highlights

·         The dollar bounced following yesterday’s big break, but remains vulnerable to additional profit taking near-term, even though it’s longer-term fundamentals are still bullish relative to competing currencies.

·         Crude oil traded more than $2 lower overnight after surging to one-month highs on Tuesday.

·         The continuous commodity index chart posted a bullish island reversal Tuesday as money poured back into the broader commodity and equity sectors. The question now is whether that signal will be confirmed or reversed in the days ahead.

·         Corn futures turned modestly lower overnight when prices failed to take out Tuesday’s high.

·         Soybeans turned lower overnight when they failed to even mount enough of a rally to test Tuesday’s high, with a big South American harvest gaining momentum. The March contract reversed lower after reaching $9.99 on Tuesday.

·         Wheat pushed to new highs overnight, but then pulled well off those highs as crude oil and many other commodities sold off.

·         Parana will be wetter the next two days, but central Brazil will be the driest in the 6- to 15-day period.

·         Argentine rains favor the south this week, shifting to the north in the 6- to 15-day period.

·         The Midwest winterkill threat remains low due to snow cover.

Commodity Weather Group Forecast

In the U.S., snow (1 to 3”) fell in the northeast 1/3 of the Midwest wheat but only the northwest corner of the Plains wheat. Showers this week remain focused on the Pacific Northwest and should improve limited soil moisture supplies. The Midwest will still see light snow today help to keep snow cover adequate to protect the crop from sub-0°F readings later this week.

Additional light snow this weekend will favor the northeast 1/3 of the Midwest as well. Showers do not return to the Delta until the 11 to 15 day and provide more beneficial moisture, but the S. Plains will have to wait until 16-30 day for showers.

In South America, scattered thundershowers picked up in central/southwest Brazil yesterday and also lingered in the far north, favoring parts of northern Mato Grosso, northwest Bahia, central/northwest Sao Paulo, western/northeast Parana, southeast Mato Grosso do Sul, and far northwest Rio Grande do Sul. Central areas will see the best rain chances into Thursday, and guidance is wetter in Parana.

While still siding drier than forecast models over the next 2 weeks, rains are otherwise most limited in central areas and favor the south during the balance of the period. This leaves parts of southwest Mato Grosso and western MGDS most likely to miss showers (10 to 15% of soy), but the pattern will also aid early harvest. Coffee/sugar areas see significant rains aid topsoil moisture in the next week and may see a few showers return late in the 11 to 15 day. A subtropical storm that develops late in the week stays offshore in the South Atlantic.

Patchy showers dissipated in central Cordoba, central/far northern Santa Fe, southern La Pampa, and southwest Buenos Aires yesterday. Rains favor the south in the near-term (mainly this weekend) and then focus north for the 6 to 15 day. Corn/soy yield potential remains high.

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

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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