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Morning Outlook

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Overnight Highlights

·         The European Central Bank just announced that it will leave interest rates unchanged at 0.05%. A press conference will follow soon to discuss other possible stimulus actions.

·         The euro rallied, the dollar sank and European equities dropped overnight as global traders braced for possible disappointment in the scope of a possible stimulus package.

·         Crude oil prices dropped below $90 and to their lowest level since April 2013 overnight as the broader commodity sector continues to deflate.

 

·         FCStone’s survey of grain industry representatives reveals expectations of a 178.4 bushel corn yield and 48.4 bushel soybean yield.

·         Corn and soybean prices consolidated lower just above yesterday’s contract lows overnight on big crop expectations.

·         Wheat prices consolidate higher within their recent trading range on the weaker dollar and as Russian and French wheat prices firm. Russian supplies are effectively being removed from the export market by high domestic prices.

·         Midwest rains are expected to be frequent enough to slow harvest progress over the next two weeks.

·         Much of the Brazilian soybean belt is expected to dry out for several weeks after weekend rains.

·         Rains are more likely to aid half of dry Australian wheat areas next week.

·         The European forecast model calls for a freeze event in North Dakota this weekend.

Commodity Weather Group Forecast

In the U.S., significant rains favored northern MO, western IL/IA, eastern NE, northeast KS, and central NE yesterday. Midwest corn/soy will see showers in southeast 3/4 of the belt slow harvest for 2 more days. Drier conditions are now confined to the weekend, as light rains race across the area Monday.

However, the more notable rains are still late next week and in the 11 to 15 day. Those will keep harvest slow, especially in the southeast 1/2 of the belt. The weekend freeze should be confined to ND corn, hampering dry down. Delta showers will slow harvest pace about every 3 to 5 days but should still be close to normal. Southeast harvest remains largely unimpeded.

Plains winter wheat showers late in the 6 to 10 and 11 to 15 day periods could narrow OK dryness. Rains will be limited in the next 2 weeks for Canadian spring wheat/canola harvest.

In South America, thundershowers favored northern Mato Grosso do Sul, eastern Mato Grosso, southwest Goias, northwest Sao Paulo, and east-central Minas Gerais in the past day. This included mostly .25 to 1” totals for 1/4 of the coffee belt, but drier conditions now persist through at least the next 3 weeks.

The drier weather will also prevail for the northern 1/2 of the corn/soy areas after the weekend, with a surge of heat (mid 90s to 100s) by the 11 to 15 day as well across northern Brazil. The CFS still shows a flip to a wetter pattern at the end of October and will be needed to aid coffee bloom and prevent germination issues to corn/soy. However, the solution is a very abrupt change and is probably at least overstating shower potential. The southern 1/3 of Brazil wheat may still run into quality concerns as rains return in the 6 to 15 day.

Two systems in the next week will also hit Argentine corn/wheat, but drier mid-month conditions will limit wetness issues. Spotty frost in south-central Buenos Aires this morning will have little impact, with minimal risks in the balance of the 2-week period.

Australia Wheat Rain Potential Focused on Victoria, Stress Likely to Develop in South Australia. S. Australia likely remains too dry in the next 2 weeks for heading wheat, but rains should help stabilize Victoria.

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

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