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Morning Outlook

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Overnight Highlights

·         The U.S. dollar surged to its highest level since June 2010 overnight and is testing trend line resistance off its 2009 and 2010 highs.

·         The dollar’s fundamentals remain strong relative to competing currencies, but some traders are buying commodities, just in case the dollar corrects lower in the short-term. This in turn is facilitating firming of grain and oilseed prices near-term to correct an oversold condition.

·         Palm oil prices rose to six week highs overnight on rising demand, providing lift once again for soyoil and soybean prices as well.

·         Ukraine consultant UkrAgroConsult cut its forecast for grain harvest to 57.4 million metric tonnes from its previous estimate of 58.5 mmt due to losses in areas close to the conflict, but neighboring Russia is raising its production estimates, offsetting the losses.

·         Drought is expected to continue in eastern Australia, necessitating more liquidation of the cow herd in that region.

·         Rains are expected to focus on the western Midwest later next week, but good harvest progress is expected prior to that.

·         No freeze threats show up in this morning’s models for Midwest crops for the next two weeks.

·         Grain and oilseed prices continued to consolidate overnight, with traders correcting oversold conditions ahead of Tuesday’s USDA quarterly stocks report.

·         Meanwhile, traders continue to talk about impressive yields that are rapidly filing storage in areas where harvest is progressing.

Commodity Weather Group Forecast

In the U.S., showers improved moisture for wheat seeding in south-central KS and the TX Panhandle yesterday but were unfavorable for open boll TX cotton. Midwest corn/soy harvest advances well until rains arrive Wednesday to Friday. Any heavier amounts favor the west 1/2 and stall harvest, but only minor slowdowns are expected in the east. 11 to 15 day rains are likely to be on the light side, with only minor harvest delays.

There are no freeze threats showing up in the latest models for the next 2 weeks, which would allow late crops to safely reach maturity. Cotton/soy harvest disruptions by showers in the South next week look more limited, keeping damage concerns limited. Plains wheat still likely sees showers reach dry spots in OK, which would improve germination. Canadian spring wheat/canola harvest is generally favorable in the next 2 weeks.

In South America, Brazil thundershowers favored Mato Grosso do Sul, western Mato Grosso, western Parana, far south-central Goias, western Sao Paulo, and bordering sections of west-central Minas Gerais with .50 to 1.75” amounts. Coffee/sugar areas farther east saw amounts of .35” or less, mainly in Sao Paulo.

Wet weather (locally 4 to 8”) in wheat areas of Parana will threaten losses this week, with near to above normal rain continuing into October as well for the belt. 6 to 15 day rains for Brazil coffee are much more significant on the GFS model today, but the Euro still holds rain farther south. Our outlook is slightly wetter and allows at least 1/3 of the belt to see enough rain for blooming but is much less aggressive than the GFS.

Argentina will be wet in the 6 to 10 day, but otherwise quieter conditions limit wetness concerns for corn/wheat.

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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