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Morning Outlook

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Overnight Highlights

* Overnight trade has corn -2, soybeans -4, wheat -4, crude -.05, dollar index even, gold +1 and the Dow Jones +60.

* Weak grain trade overnight on expectations for higher USDA yield estimate, poor corn exports and anxiety if China will continue their buying pace into the end of the year.

* Dalian Exchange lower in corn and soy.

* This morning export sales; corn 556,000 mt (expected 400-650k), soybeans 2.087 mln mt (expected 1.4-1.75 mln), wheat 556,000 mt (expected 300-550k).

* Yesterday’s EIA report showed ethanol production surging to the highest level in more than three months to 969,000 barrel/day. This production puts grind consumption in line with USDA usage expectation.

* Independent truckers in Brazil plan to start an indefinite strike on Monday. A two week strike in February this year blocked roads at more than 100 sites in six states, but in April calls for a strike had little effect.

* In China, reserve sales this year totaled 4 mmt compared to 28.8 mmt last year. Analyst estimates are as high as 150 mmt of corn reserves.

* Funds reportedly bought 3,000 soy and 8,000 wheat and were even corn on Wednesday.

Commodity Weather Group Forecast

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In the U.S., rains (.10 to .50″) favored the western 1/2 of the Plains hard red wheat yesterday. Shower potential remains limited for the eastern Plains in the next two weeks, leading to another spell of moisture stress in the eastern third of the KS wheat belt. Midwest soft red wheat remains likely to see frequent rains, as showers favor southwest areas that still have limited soil moisture supplies. Midwest corn harvest will only be delayed in WI/MI from showers in the 6 to 10 day, as most other areas finish up over the next week. Rains in the Delta this week and again in the 11 to 15 day slow seeding of the last 1/3 of the wheat. Southeast rains this week persist into early next week, further slowing cotton/soy harvest.

In South America, showers favored parts of southern/western Mato Grosso, northern/central Mato Grosso do Sul, far southwest Goias, Sao Paulo, far northern Parana, and central Rio Grande do Sul in the past day across Brazil. Rains will be most active in central/southwest Brazil during the next 10 days, expanding back to the north in the 11 to 15 day. While the GFS model shows drier risks in today’s outlook for the Center-West soy areas, our outlook continues to side with the wetter guidance. The mid-month rains should keep stress limited to far northeast soy/coffee areas, while the heaviest rains focus on central areas to slow late spring soy seeding but primarily hinder sugarcane fieldwork and port loading. The heaviest totals should still focus north of the main remaining wheat harvest in RGDS to limit quality concerns, although fieldwork will be slow. Argentina picked
up scattered showers in Cordoba/Santa Fe/Entre Rios in the past day, with a similar event early next week in northern/far western parts of the corn/wheat belt. However, a wetter 11 to 15 day offers the best chance for more generous coverage, which would help to keep moisture adequate for crop development.

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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