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Morning Outlook

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Overnight Highlights

* Overnight trade has corn +1, soybeans -1, wheat +2-3, crude +.05, dollar +.47, gold -2.4 and the Dow +25.

* Mixed trade this morning with market looking for news following yesterday’s uneventful USDA report.

* Brazilian weather mostly favorable although dry concerns continue in northern areas and soybean rust pressure mounts in the wet south.

* USDA export sales out this morning.

* Prices of renewable fuel credits were lower yesterday on the expectation that the biodiesel credit will not be switched away from the blender.

* Argentina’s Mauricio Macri takes over as President today. Trade will watch for export tax change announcements.

* Barge freight firmed at St Louis and the Illinois River with reports of better soybean movement.

Commodity Weather Group Forecast

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In South America, thundershowers scattered across central Mato Grosso and eastern Minas Gerais with more extensive rains in southern Sao Paulo, far southern Mato Grosso do Sul, Parana, Santa Catarina, and Rio Grande do Sul yesterday in Brazil. The best rain potential for drier areas in Mato Grosso is likely the middle of next week and models have increased the potential for better rains in the 11 to 15 day. Stress remains limited to 10% of summer corn and nearly 20% of soy/rice (focused on northern Mato Grosso, Tocantins, Bahia, and points north). The improved shower potential in the 6-15 day out-look in central Mato Grosso and western Goias should help to prevent an expansion of the dry area in key soy areas. Active rains elsewhere support corn/soy growth, but frequent rains across southern Brazil in the next two weeks keep rust risks elevated for soy in 1/3 of the belt. The northeastern 1/4 of coffee belt remains unfavorably dry. Argentina saw rains favor north-ern Santa Fe and northern Entre Rios in the past 24 hours. Showers return late weekend favoring the northern 1/2 of corn/ soy areas but a more extensive event covers most of the belt the latter half of next week ensuring favorable moisture for early development. The rains next week will slow wheat harvest in the northern areas but lodging damage should be isolated.

In the U.S., rains (.10 to .75″) fell in about 1/2 of Pacific Northwest wheat yesterday. Rains remain very active in the Pacific Northwest through the weekend, enhancing soil moisture reserves for next spring. Significant rains fall in the Midwest/Delta wheat areas Sunday/ Monday. Models have generally scaled back amounts but localized flooding is still possible primarily in AR. On the other hand, the rains improve moisture supplies for the drier eastern Mid-west wheat. Only very late cotton/soy harvest and wheat seeding in the Southeast sees minor delays from showers late 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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