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Morning Outlook

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Overnight Highlights

· Overnight trade has corn +1 ¼, soybeans -1 ½, wheat -2-4, crude -.37, dollar -.05, gold -4.9 and the Dow -155.

· Some support overnight from end users and bargain hunters. Trade this week will be watching the Argentine administration after installation Thursday and tomorrow’s USDA report.

· Asian and US equities are lower on continued economic concerns out of China. Recent data shows that China’s exports fell by a more-than-expected 6.8 percent in November from a year earlier and imports fell 8.6 percent. A less-than-expected drop but still a signal of weak demand from the world’s second biggest economy.

· Chinese soybean imports year-to-date were reported at 72.5 mmt, up 15.4 percent from the same period a year ago.

· Argentina continues to offer corn under US values in Feb/Mar/Apr slots.

· Concern that Abengoa may close its US ethanol plants, putting 300+ mln gallons of ethanol production in question until buyers can be found.

· Southern Brazil moisture (especially in Parana) continues to elevate concerns of soybean rust pressure.

· Ukraine Ag Ministry estimate some 17 percent of winter seeded crops have not sprouted. Of the sprouted crops, 66 percent are in good to satisfactory contention.

· Monday funds sold 10,000 soybeans, 7,000 corn and 2,000 wheat.

Commodity Weather Group Forecast

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In South America, showers were widely scattered in southwest Argentina and northern Brazil in the past day, favoring central/northeast Minas Gerais, Espirito Santo, southwest Buenos Aires, and central/southeast La Pampa. Rains favor central areas this week and the south in the 6 to 15 day, but showers also pick up a bit into the Center-West in the first 1/2 of next week and again in the 11 to 15 day. This pattern will keep soil moisture profiles steady, with surpluses (and elevated soy rust risks) persisting in central/southern Brazil (particularly Parana) and deficits lingering in the Center-West/Northeast but still most prominent in parts of Bahia, Tocantins, northern Mato Grosso, and points north. Stress encompasses 15 to 20% of soy/rice and 10% of summer corn. The driest spots will also see intermittent heat (mid 90s to low 100s) on the driest days, but a sustained pattern of unusually hot daytime highs remains unlikely. Otherwise, the active rain pattern will be very supportive of summer crop growth. Argentina will see showers reach about 1/2 of corn/soy from the combination of rains in the next day and again on Saturday after a brief warm up (90s) late this week. However, the broadest coverage arrives at the middle of next week, aiding corn/soy. Possible dry spots in the far southern wheat belt will largely be too late to threaten notable stress.

In the U.S., rains (.25 to 1.5″) fell in the eastern Carolinas, while Pacific Northwest wheat had widespread .50 to 2.5″ rain amounts yesterday. Abundant rains remain confined to the Pacific Northwest this week, recharging soil moisture supplies for the dormant wheat. Rains in the Midwest/Delta wheat areas Saturday through Monday are not expected to cause more than isolated wetness damage, while the rains improve soil moisture in the drier wheat areas of the eastern Midwest. Late cotton/soy harvest and wheat seeding in the Southeast remains favorable this week, with only minor delays next week.

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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