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Morning Outlook

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Overnight Highlights

* Overnight trade has corn +2, soybeans +4, wheat +6, crude -.50, dollar -.07, gold even and the Dow Jones +75.

* Grain markets generally higher this morning on profit taking and commercial interest. Yesterday’s USDA report added to the bearish tone of the market, but speculative positions are now at a sizable short position which coupled with slow farmer selling should provide market support.

* The market has long expected an increase in China stocks, but the market wasn’t anticipating the adjustment to come in the November report. Global corn stocks increased 20 mmt more than the largest trade guess. Outside China though, global corn stocks were essentially left unchanged.

* Domestically USDA found 100 mln more of production from better yields in the west, offsetting the trim in eastern yields while cutting demand due to increased ethanol usage of milo and the lack of competitiveness on the export market, bumping carry-out 200 mln bu.

* Funds reportedly sold 20,000 contracts of corn yesterday, taking them to an estimated net short of 70,000 which would be the largest short position since last spring. Yesterday’s managed money activity will be included in Friday’s Commitment of Trader’s report.

* USDA found a new record high yield in US soybeans at 48.3 bpa, up from 47.2 last month but crush was increased as well as exports, yielding an increase in carry-out by 40 mln bu to 465 mln bu – the largest since 06/07.

* Soybeans are in an oversold condition with yesterday’s low at 8.50 providing support, near-term resistance can be found in the 8.80-9.00 area.

* EIA energy data will be reported today. The corn market will be watching ethanol grind and supply information.

* Thursday’s USDA weekly export sales will not be released until Friday due to Veterans Day holiday.

* Brazil weather is mixed, Argentina good and South Africa still historically dry.

Commodity Weather Group Forecast

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In the U.S., rains (.10 to .50″) lingered in NC yesterday. A storm over the western Plains will produce snow in the northwest Plains hard red wheat today (no damage). Rains then cross the northwest Midwest tonight/tomorrow, with corn harvest delays of note limited to WI/MI. The next storm early next week continues to trend stronger and should produce some beneficial showers for drier wheat in eastern KS, in addition to aiding the southwest Midwest. Delta wheat seeding should gradually improve until early next week, when rains become heavy and pose the threat of localized wetness damage. Additional 11 to 15 day rains keep Delta seeding slow. The Southeast is mainly dry over the next two weeks, improving cotton/soy harvest.

In South America, locally heavy rain favored far southeast Sao Paulo, south-central Parana, western Santa Catarina, and western Rio Grande do Sul in Brazil in the past day, with more rain for southern wheat areas in the next two days. This will hinder wheat harvest and cause quality losses. A break arrives into early next week, but additional 6 to 15 day rain keeps concerns in place (mainly in RGDS). Expanding rain next week will initially favor Brazil coffee and then reach northern soy areas, further limiting dryness concerns. The arrival of showers will also moderate Center-West heat, although most spots are only peaking in the mid to upper 90s this week. Sugarcane and central ports will encounter about 5 to 6 rain days in the next 15 days, interrupting activities but normal for this time of year. Argentina saw spotty light showers through central/far southeast areas (mainly
central Cordoba), but notable rains were limited to far northern areas. Rains tonight/tomorrow will aid central corn/soy and northern wheat areas, with the south/west favored at the middle of next week from another event. Warmer temperatures aid growth this week, but cool weather returns in the 6 to 15 day to keep crops behind normal.

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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