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Morning Outlook

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Overnight Highlights

* Overnight trade has corn +1/2, soybeans +6, wheat +2-3, crude +.60, dollar index +.47, gold -2.0 and the Dow Jones +80.

* Support from China demand for US Soy, slow farmer selling, strong basis in East for corn and continued Fund buying.

* This morning’s export sales for 15/16 show wheat at 13.1 million bushels (middle of expectations), corn at 9.7 million bushels (below expectations), soybeans 74.6 million bushels (above the highest expectation).

* The Chinese futures Dalian Exchange has Corn, Soybean, veg oil and Soy Meal higher.

* Top Russian grain union official said the group expects 30% of winter wheat areas to be affected by drought.

* Brazilian analyst AgroConsult estimates Brazil soy production for 2016 at 100.6 mmt – compared to last season at 96.2 mmt. Forecast for 15/16 Brazilian corn at 88.6 mmt compared to the 14/15 crop at 85.5 mmt.

* Cattle: One major packer was said to be bidding $137 per cwt on a live basis in Texas, up $1 to $3 from last week.

* Monthly USDA Cattle on Feed report out tomorrow.

Commodity Weather Group Forecast

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In the U.S., showers (.25 to 1.5″, locally 5″) favored the TX/OK panhandles and southwest/north-central KS yesterday. Rains continue to expand across Plains hard red wheat today, bringing needed moisture for crop establishment. Rains in the TX Panhandle have stalled cotton harvest, with localized damage/quality declines and now the concern that more rain may arrive in the 6 to 10 day. Midwest showers are light this week but notably heavier next week. This will aid soft red wheat growth but slow late Midwest corn/soy harvest. Delta wheat still sees abundant rains in the next 2 weeks, improving moisture for planting and only delaying very late cotton/soy harvest. Dry weather aids Southeast cotton/soy harvest through next week.

In South America, showers favored central/northern Rio Grande do Sul, central/eastern Santa Catarina, and coastal areas of Sao Paulo/Parana in the past day, with only very spotty showers farther north in Brazil. Rains gradually expand northward in Brazil, peaking around the middle of next week for coffee and Center-West soy areas. Another round of rain is also more likely later in the 11 to 15 day. The GFS model does show more limited rain totals in Mato Grosso with the first round of rain, but our forecast sides closer to the Euro model. The rains will help to improve topsoil moisture for dry coffee/soy areas, with only the northeast 10 to 15% of the crop areas likely to miss. Southern wheat harvest will still slow frequently and may encounter minor quality declines from near to above normal rainfall, and sugarcane fieldwork will also encounter an increase in interruptions in Sao Paulo. Wetter trends on the Euro guidance for the 6 to 10 day in Argentina bring the models into better
alignment. While a few spots could see excess rain, the showers will be largely welcome to ensure favorable moisture for corn/wheat growth. Spotty frost in far southern wheat areas in the next two nights will not threaten any damage.

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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