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Morning Outlook

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Overnight Highlights

·         Global equities came under pressure overnight as German industrial production fell more than expected and Spain struggled to deal with its first, and possibly second, case of Ebola.

·         The U.S. dollar bounced modestly overnight after failing to test Friday’s low.

·         Grain and oilseed prices rallied Monday on the possibility that harvest delays and a weekend frost had hurt yields & quality, but Monday afternoon’s USDA ratings improved for both corn and soybeans.

·         Crop ratings were steady to higher in every state but one for both corn and soybeans, and the decline in that case was very minor, with most states showing upward movement.

·         A Reuters’ poll of trade participants ahead of Friday’s USDA report suggests expectations that USDA will raise the corn crop to 14.5 billion bushels on a yield of 174.7 bushels per acre.

·         The above suggests that USDA will take a couple million off harvested acreage in this report, based on the September FSA data, but that is a risky assumption, since USDA allowed for delayed certification this year.

·         The poll revealed expectations of a 3.976 billion-bushel soybean crop on a yield of 47.6 bushels per acre.

·         Wheat remained firm on good global demand overnight, while corn and soybeans pulled back from yesterday’s strong gains.

·         Significant rains are expected in dry areas of Oklahoma and Colorado.

·         Substantial rains are expected to add to harvest delays in the southern half of the Midwest and Delta Thursday into the weekend.

·         The northern half of the Midwest should avoid the rains.

·         The southeastern half of the Midwest is expected to be favored by a system next week.

·         Limited showers with increased heat for the northern half of Brazil the rest of October, which would be equivalent to our April in the growing season.

Commodity Weather Group Forecast

In the U.S., showers favored the north 1/2 of the Delta and southeast 1/4 of the Midwest yesterday and should again today. Substantial rains stall harvest in the southern 1/2 of the Midwest and Delta Thursday into the weekend. The north 1/2 of the Midwest avoids those rains. Models are in conflict about the intensity of a storm next week in the Midwest. However, the most likely focus for significant rains is in the southeast 1/2 of the Midwest and Delta, further slowing corn/soy harvest and leading to quality loss for cotton. 11 to 15 day rains taper off for most of the Delta/Midwest, limiting damage to localized flooding.

Plains wheat is expected to see extensive showers this week, greatly improving moisture in drier areas of OK/CO. The Southeast harvest outlook remains favorable, and Canadian spring wheat/canola should see a near normal harvest pace.

In South America, showers were limited to a few spots in western Mato Grosso, far southwest Mato Grosso do Sul, southwest Parana, and northwest Rio Grande do Sul in the past day. Brazil rains remain frequent in the southern 1/3 of the Brazil wheat in the next few weeks, maintaining quality concerns for RGDS. While a few showers are possible late in the 11 to 15 day for Mato Grosso, increasing moisture deficits in the balance of October will hinder germination and could slow seeding (soy currently less than 10% complete) in the northern 1/2 of the belt.

Coffee flowering will remain delayed and trees under stress (particularly in key areas of Minas Gerais), with rain chances limited to the southern 1/4 of the belt late in the 11 to 15 day. Highs rise into the 90s for coffee and mid-90s to 100s for northern corn/soy next week.

Argentine rains Wednesday/Thursday and again about a week later may keep some excess moisture in place (10% corn/20% wheat) in mainly Entre Rios/southern Buenos Aires, but limited rains elsewhere will aid drying and prevent more notable concerns.

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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