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Morning Outlook

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Overnight Highlights

· Overnight trade has corn +1/4, soybeans +3/4, wheat +1, crude -.40, dollar +.05, gold +1.4 and the Dow +80.

· Fed expected to raise interest rates for the first time in nearly a decade on an improved US economic outlook.

· Trade continues to watch for peso devaluation signals out of Argentina. Strong devaluation would bring new, competitive grain supplies to the global market from Argentina. Arg corn and wheat are some of the cheapest on the market now and would get cheaper with devaluation.

· Forex traders are anticipating the Arg peso to devalue from the current 9.8 peso per dollar to 13.5-15.0 peso per dollar.

· Expectations are low of the blender credit for Biodiesel getting switched to producer. If it doesn’t pass, soy oil will likely be under short term pressure.

· Problem areas exist in Brazil, but are small so far. Trade continues to watch. Expectation still for record production but Jan/Feb weather will be important.

· Cattle continue to try to forge a bottom. Cash trade in the northern Plains had cattle off $3 for the week at $184.

· Tuesday funds sold 7,000 soybeans, 2,500 corn and bought 2,000 wheat.

Commodity Weather Group Forecast

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In South America, showers scattered across northern/far southwest Mato Grosso, far southwest Goias, southwest Minas Gerais, Sao Paulo, northern Parana, and central/northern Mato Grosso do Sul during the past day in Brazil. Limited coverage this week in Center-West soy areas will allow moisture stress to build, but an uptick in showers remains well-supported by models for Monday to Wednesday and again early in the 11 to 15 day. While unlikely to notably recharge moisture supplies, the rains will be critical to limit yield loss for now in up to 1/3 of the soy and 15 to 20% of corn/rice, with central Mato Grosso soy particularly vulnerable if rains falter. Our current outlook focuses notable stress on the northeast 10 to 15% of Brazil corn/ soy (particularly Bahia). While nights remain quite warm in northern crop areas, severe heat will continue to be avoided during
the day. While any flooding will remain localized, the ongoing wet pattern will keep rust risks elevated for the southern 1/3 of soy, requiring fungicide applications. The northeast 1/4 of the coffee belt could begin to slip drier again, but moisture otherwise remains favorable for coffee/sugar. Argentina will see scattered showers by tomorrow and again at the middle of next week and in the 11 to 15 day, providing adequate moisture for nearly all corn/soy without raising wetness concerns of note.

In the U.S., rains (.10 to .50″) were limited to MO/AR/IL overnight, with 2 to 5″ of snow in the northwest corner of the Plains hard red wheat belt. Mainly light showers fall in the eastern Delta today and the Southeast tomorrow. The main rains are still slated for the first half of next week in the Delta/Midwest soft wheat, but heavier amounts are confined to the southeast ¼ of the Delta. The rain event in the 11 to 15 day is likely to have more extensive rains in the Delta/southeast Midwest that could lead to localized wetness damage. Warmth over the next 2 weeks keeps Plains/Midwest winterkill threats minimal.

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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