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Morning Outlook



Overnight Highlights

* Wholesale prices fell 5.9% in China in September, extending its streak of negative readings to 43 months. Stocks were modestly lower in Asia and China for the most part on increased global economic concerns, led by the Chinese data.

* We’ll get the chance to see U.S. retail sales data later this morning. The dollar is moving lower this morning, down more than 200 points, on ideas that a rate hike is highly unlikely this year. The dollar index fell to its lowest level since September 18 in overnight trade. Weakness in the dollar is supporting modest buying in the broader commodity sector this morning.

* The October USDA-FSA data showed a modest increase in prevent-plant acres from the September report, but nothing market-moving. Corn prevent-plant acres rose to 2.362 million acres, up 10K from September, while soybean prevent-plant acres rose to 2.227 million, up 8K from the previous month.

* USDA’s weekly crop progress report on Tuesday afternoon revealed that the harvest is moving forward at a rapid pace. Producers had harvested 42% of the U.S. corn crop as of October 11, up 15 points on the week. Soybean harvest had reached 62% as of Sunday, up 20 points on the week. Wheat planting reached 64%, up 15 points on the week. Some delays in emergence of note could be seen in dry areas of Oregon and Texas.

* December corn dipped to $3.82 overnight, but has firmed again to trade near $3.85 this morning, fractionally above Tuesday’s close. The market is well-supported at this point after holding key support on a test earlier this week, but it still needs outside help from the broader commodity indices.

* Tuesday’s rally in soybeans produced a steady flow of cash sales across the Midwest, but buying continued amid strong demand and a weaker dollar overnight. November soybeans is pushing to new highs for the move this morning, although just a penny higher on the day, with the lead contract at its highest level since August 20th. Speculative short-covering provided a big lift Tuesday, along with broad-based buying in the major commodity indices.

* Wheat prices are consolidating while waiting for further direction today. Upfront supplies are big, but short-covering and bargain buying provide support amid rising concerns about patterns of global adverse weather in major-producing areas. Rain prospects for the Plains winter wheat belt are limited to showers in the 6- to 10-day period in the eastern Plains. Showers are expected to scatter across the Former Soviet Union wheat belt next week, but confidence of widespread relief is low. The majority of the forecast ensembles keep rains too light in eastern Ukraine to improve conditions. Rain potential for South Australia wheat is also too limited to improve crop prospects.

* Mostly dry conditions are expected to prevail through the week for the Midwest, facilitating rapid harvest progress. A cold front the first half of next week is expected to produce showers across much of the Midwest and northern Delta, providing brief delays and some relief for soft wheat.

* Wet weather will continue to cause frequent wheat harvest delays in southern Brazil. A gradual northward expansion of showers in the 11- to 15-day period is shown in a slight majority of the Euro-model ensemble members, but a warmer/drier forecast is favored. The lack of rain in the north will aid fieldwork in northern and central areas, but moisture deficits continue to build for the northern half of the Brazilian soybean belt. A similar pattern is seen for the 16- to 30-day period.

Commodity Weather Group Forecast


In the U.S., mostly dry conditions prevailed yesterday, and this pattern will continue to aid rapid harvest across the Midwest/Delta through the weekend. A cold front in the first half of next week produces showers across much of the Midwest/northern Delta, aiding germination and early growth of soft red wheat. Harvest delays should be brief for the Midwest/Delta. Another surge of showers into the Delta in the 11 to 15 day further eases dryness for wheat in that region but does slow late soy/cotton harvest.

Plains rain prospects are mainly limited to the eastern third of the wheat belt in the 6 to 10 day. This will hamper hard red wheat establishment in KS/CO, where rain deficits have been most pronounced over the past month.

In South America, showers favored Santa Catarina (Brazil) and La Pampa (Argentina) in the past day. Wet weather will continue to cause frequent harvest delays and localized damage in southern Brazil wheat areas into early November, particularly in Rio Grande do Sul.

A gradual northward expansion of 11 to 15 day showers in Brazil is indicated in a slight majority of Euro ensemble members, but warmer/drier guidance remains preferred for coffee/sugar and northern soy. While a few showers could extend into far southeast Minas Gerais coffee, our forecast reaches less than 1/4 of the coffee and allows dryness to build further for most of the belt.

The lack of rain will aid fieldwork for both soy and sugarcane in northern/central areas, but moisture deficits build for the northern 1/2 of soy. 16 to 30 day guidance supports a continuation of a similar Brazil pattern (wet south/drier north).

Argentine showers will mainly favor far western/northeast corn/wheat in the next two weeks. A few showers may occur in the 6 to 10 day, but developing moisture deficits remain possible in the central 1/2 of the corn belt due to otherwise limited rain in the next 30 days. Light frost on Saturday morning still poses no risk for far southern 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(r) | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

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