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Morning Outlook



Overnight Highlights

* Commodity prices have had their best week since 2012 thus far as money flows back into many of the major commodity indices after reaching an area of value at multi-year lows; in some cases their lowest prices since 2002. The dollar fell to a fresh three-week low overnight, with crude oil exceeding $50 per barrel for the first time since July 23, topping just below the 200-day moving average at $50.94 thus far this morning.

* The Thomson Reuters CRB index gapped above major chart resistance to two-month highs this morning reflecting renewed interest in the broader commodity sector. However, one of the keys today and in the days ahead will be whether crude oil can establish itself above $50 and above the 200-day moving average.

* The increased money flow into the broader commodity sector overnight provided a lift for grain and oilseed prices as well. However, the primary focus of grain and oilseed traders will be USDA’s monthly crop report. The markets are behaving as if they want to work higher from harvest lows if USDA fails to provide a sufficient bearish surprise today. Trade expectations for key numbers in the report are as follows:
U.S. New-Crop Ending Stocks





billions of bushels

USDA October 9

Average Trade Estimate




Highest Trade Estimate




Lowest Trade Estimate




Previous USDA Estimate




Water Street Solutions




U.S. Yields & Production







Yield in bushels per acre

Production in billions of bushels

USDA October 9

Pre-Report Estimates

Average Trade Estimate





Highest Trade Estimate





Lowest Trade Estimate





Previous USDA Estimate





Water Street Solutions





* The above Water Street estimates are my estimates for this report, with expectations that these numbers will shrink ahead of USDA’s final numbers in January.

* Ukraine may reduce winter wheat acreage by 30% this year due to ongoing drought problems in the region. That claim was made overnight by a senior weather forecaster with the government of Ukraine. Time is rapidly running out for the region to see an improvement in cold dry weather that is hampering the ability to germinate and establish the crop ahead of when the crop typically goes dormant.

* Beneficial, but limited, showers linger in southern Kansas and northern Oklahoma this morning, with expectations they will scatter into the northern Delta later today. The rest of the five-day outlook is quiet with just a few showers in the far eastern Midwest late in the period. The dry pattern continues into the 10-day period, but showers likely scatter into the Plains and southwestern Midwest late in the period. The 11- to 15-day period trended wetter for the Southern Plains, eastern Midwest and Delta, but now we need to see that wetter trend actually verify for wheat areas. Corn and soybean harvest should advance rapidly with few significant interruptions.

* Southern areas of Brazil remain favored over the next two weeks and into the 16- to 30-day period. The rains are expected to slow corn and soybean seeding at times while threatening wheat harvest, particularly in far southern areas. Farther north, weekend showers are expected to be limited for Mato Grosso soybeans, with the northern half of Brazil soybeans expected to see mounting moisture deficits this month.

* Forecast models overnight increased shower potential for moisture in the Former Soviet Union wheat belt in the 6 to 10-day period, but they may be delayed until the 11- to 15-day period. The rains would still be in time to aid growth in the southern half of the belt, allowing some needed growth prior to dormancy. Meanwhile, shower relief remains limited for Australian relief, with light 0.10 to 0.50″ rains focusing on the southeast fringes of the belt, with yields dropping in South Australia and western Victoria.

Commodity Weather Group Forecast


In the U.S., showers (.25 to 1″) fell in southeast KS, southwest MO, central MI, central IL, and southern parts of the TX Panhandle yesterday. Beneficial but limited showers linger in southern KS and northern OK this morning and are expected to scatter into the northern Delta later today, benefiting newly seeded wheat. The rest of the 1 to 5 day is quiet, with just a few light showers in the far eastern Midwest late in the period.

The dry pattern continues into the 6 to 10 day, but showers likely scatter into the Plains/southwest Midwest late in the period. The 11 to 15 day has trended wetter for the Southern Plains, eastern Midwest, and even more so for the Delta. This would be a notable boost to moisture for soft red wheat seeding, but dry spots may linger in the western Plains hard red wheat. The rains are unlikely to impact Midwest corn/soy harvest notably. Delta rains could impact cotton quality and slow harvest, but impacts should be minor given good near-term progress.

In South America, Brazil thundershowers favored much of Rio Grande do Sul, Santa Catarina, and eastern/far southern Parana in the past day. Southern areas remain favored through the next two weeks and into the 16 to 30 day, slowing corn/soy seeding at times but more notably threatening wheat harvest problems (particularly RGDS).

Weekend showers will be limited for Mato Grosso soy, and the northern 1/2 of Brazil soy remains likely to see building moisture deficits this month. The dryness will also continue to hinder coffee flowering in 2/3 of the belt. Intermittent interruptions to sugarcane harvest in the 1 to 5 and 11 to 15 day will pose only brief interruptions to fieldwork.

Showers were very light in southern/western Argentina in the past day. Moisture supplies will slip for corn/wheat, but 16 to 30 day rain prospects are a bit better on the latest Euro guidance. Cold air in far southern wheat areas through the next two nights will bring frost but very little damage.

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(r) | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

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