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Morning Outlook

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Overnight Highlights

· Overnight trade has corn +1, soybeans -4, wheat +1 ½, crude -.75, dollar -.35, and gold +3.3.

· Export sales estimate ranges for today; Corn 500-750k mt, Soybeans 650k-1.0 mln mt, Wheat 200-400k mt.

· Corn basis continues to strengthen not only in the east, but in the central and western corn-belt as processors are running short on ownership and farmers are reluctant to sell. Many facilities in the west have improved basis more than 20 cents post-harvest in-spite of the record yields in western states.

· Weak crush margins continue to weigh on soybean complex. Soymeal futures are now trading at four year lows.

· Soy market continues to be anxious over the upcoming Argentine presidential elections. Campaign promises have included the reduction or elimination of many agricultural export taxes and the free floating of the country’s currency to allow devaluation. Any promises would require post-election follow through and would take significant time for implementation.

· Israel reportedly bought 80,000 mt of corn for Feb-Apr delivery as Gulf corn is now beginning to become more globally competitive.

Commodity Weather Group Forecast

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In the U.S., rains (.50 to 2″, locally 5″) covered the far eastern Delta, far southeast Midwest, and much of the Southeast yesterday, with .10 to .75″ rains in the northern/eastern Midwest. Rains linger in the Southeast today and add to harvest delays for cotton/soy, but a week of drier weather then follows there and in the Delta to ease excess wetness concerns for soft red wheat. A band of snow crosses the northern Midwest this weekend, with 2 to 8″ accumulations from northeast NE to MI only hampering very late corn harvest. C. Plains and Midwest wheat will see cold pushes this weekend and again late next week push wheat into dormancy, helping to make the crop more winter hardy and unlikely cold enough to pose a winterkill threat.

In South America, showers in Brazil started to shift north in the past day and scattered across eastern Mato Grosso, Goias, northern/eastern Minas Gerais, Espirito Santo, northwest Sao Paulo, and southern/far northeast Mato Grosso do Sul. Expansive coverage in the next two weeks remains likely to further limit any near-term dryness concern and will recharge topsoil moisture, although rains may be very heavy (6 to 10″ or more) in parts of Parana over the next ten days. This will threaten some pockets of excess moisture for corn/soy and will slow port loading, but the pattern otherwise aids corn/soy/coffee/sugar development elsewhere. The Center-West soy will see showers peak Friday/Saturday, with additional chances at the middle of next week and in the 11 to 15 day. Showers favored northeast La Pampa, northwest Buenos Aires, southern Santa Fe, Entre Rios, and central/
southeast Cordoba in Argentina in the past day, aiding moisture supplies for corn/soy. Showers tend to focus on southwest areas at the middle of next week and late in the 11 to 15 day. Moisture supplies will remain largely adequate, and the lack of persistent rain will limit seeding delays. However, cool weather will keep crop growth slow.

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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