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Morning Outlook

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Overnight Highlights

* Overnight trade has corn +2, soybeans +5, wheat +2, crude even, dollar -.17, gold +2.5 and the Dow +65.

* Support coming from the large fund short position reported by the Commitment of Traders, the EPA RFS announcement and the weaker dollar.

* The EPA announced its 2016 Ethanol mandate at 14.5 bln gallons vs its initial proposal of 14.0 bln gallons. The report was friendly but the mandate is unlikely to have significant impact on corn usage for 2016.

* Yesterday’s Commitment of Traders report showed Managed Money added another -15k short positions to corn taking them to nearly -100k short contracts. Closing in on the second shortest corn position they have held since their position reporting began in 2006.

* Managed Money added shorts to soybeans, soymeal, CBOT wheat and KC wheat but reduced their short position in Minneapolis and added to their long position in Soyoil.

* In USDA’s final crop condition report until next spring, they raised the winter wheat condition rating to 55 percent good/excellent vs last week at 53 percent and an average of 61 percent for this date.

* Australia’s ABARE lowered their 15/16 wheat forecast to 23.98 mln mt from their Sept estimate of 25.28 mln mt.

* Reuters reports Brazilian farmers are now at a 10 year high using barter-based financing to pay for fertilizer and equipment. Close to 40 percent of the cost of the crop is estimated to be on barter as the government tightens cheap farm credit.

* Stats Canada will release their production report Friday morning.

Commodity Weather Group Forecast

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In the U.S., rain (.25 to 1.5″) favored the central Midwest/northern Delta yesterday, with snow accumulations of 2 to 8″ in NE/SD/MN/northwest IA. Light snow/rain will end in the Midwest/Delta later today. Dry weather will dominate crop areas then through much of next week. This will allow excessively wet wheat areas in the southeast Plains/southwest Midwest/northern Delta to drain and keep damage minimal. Showers are likely to develop in the 11 to 15 day in the eastern Midwest and Delta, but flood potential is minor. Milder than normal temperatures in the next 2 weeks keep winterkill risks for wheat minimal.

In South America, showers were widely scattered across central/northwest Brazil in the past day favoring southeast Goias/southern Minas Gerais/northeast Sao Paulo. Rains will be most limited in Center-West/Northeast Brazil this week but expand northward in the 6 to 15 day. This should remain adequate to limit severely dry spots in Mato Grosso/Goias, focusing notable moisture stress farther north/east on 10 to 15% of corn/soy. However, a drier 11 to 15 day risk from the GFS guidance in the Center-West will be monitored. An active pattern elsewhere will be supportive of corn/soy/coffee/sugarcane growth. The wettest areas are currently in far southern Mato Grosso do Sul, northern Parana, and southwest Sao Paulo, but wetter weather will also return to Rio Grande do Sul over the next two weeks. While a break in the 6 to 10 day limits flooding risks, the wet pattern will continue to support elevated risks for soy rust in the south 1/2 of the belt. Showers were limited to the southwest fringes of Argentina overnight and reach only far northern/western crop areas this week. Showers briefly extend farther east with a frontal passage at the middle of next week, but the main rain chance is still in the 11 to 15 day. Dry spots may develop in parts of southern Buenos Aires (20% of wheat), but moisture should remain adequate in corn/soy areas.

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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