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Morning Outlook

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Overnight Highlights

* Overnight trade has corn even, soybeans +3, wheat +1, crude +.60, dollar -.50, gold -1.0 and the Dow +38.

* The US dollar is lower after posting its highest level since 2003.

* EIA reported weekly ethanol production at 956,000 barrels per day was off 52,000 from last week’s record. Ethanol stocks came in at 20 mln barrels up 370,000 barrels from last week.

* Russian Ag Minister commented that they don’t have plans to cut off or restrict grain exports to Turkey.

* On corn exports, Argentina is offering corn out in March for 20 cents under US offers.

* UN food agency said world food prices fell in November for the first time in three months, pulled down by a strong dollar and ample supplies.

* Yesterday funds sold 6,000 corn, 3,000 wheat and bought 4,000 soybean.

Commodity Weather Group Forecast

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In South America, showers favored far southwest Mato Grosso do Sul, southern/northeast Parana, central/northeast Sao Paulo, southern Minas Gerais, far southeast Goias, and northern Rio Grande do Sul in the past day and continue for the rest of this week. Rains then expand north through the middle of next week. After a break in the first 1/2 of next week in the south, rains then return in the balance of the 6 to 15 day. While flooding threats are still limited, the surplus moisture in the southern 1/2 of the soy areas will keep rust risks elevated. While the best amounts remain farther south and east, the GFS has trended wetter and closer to both our outlook and the preferred Euro guidance in the 11 to 15 day for Mato Grosso. This should be sufficient to limit crop stress to the northern 10 or 15% of the corn/soy belt. Highs will peak in the mid 90s to low 100s for Center-West/Northeast Brazil during the rest of this week and again in the 6 to 10 day but otherwise moderate as showers move through. Abundant moisture should continue in Center-South Brazil, aiding corn/soy/coffee/sugarcane growth. Argentina will also briefly turn hotter (90s) in the 6 to 10 day for corn/soy areas, but a return of 11 to 15 day rain in many areas should limit any concerns to late moisture stress to the southeast 1/4 of the wheat belt.

In the U.S., rain (.25 to 1″, locally 2″) was limited to GA/SC yesterday, with light snow confined to the northeast Midwest. Dry weather will dominate most areas through next week. The exception will be rain in the Southeast on Monday and in the Pacific Northwest for much of the next week. A significant storm will develop at the end of next week, with extensive rains in the Midwest and Delta. Wetness damage should be limited due to the extended dry period over the next week. Plains dryness is not a concern, as recent rains have replenished low soil moisture and much of the crop is now dormant.

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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