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Morning Outlook

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Overnight Highlights

* Overnight trade has corn -3/4, soybeans -6, wheat -4, crude -.10, dollar +.98, gold +12.5 and the Dow +50.

* Markets generally under pressure this morning from continued weakness in the energy market and the devaluation of the Argentine peso.

* Argentina announced it would allow the peso to float starting today. The peso is pegged at around 9.8 and traders expect it to trade near 14 pesos to dollar. Expectations are for the devaluation to encourage Argentine farmer selling.

* Malaysian palm oil futures are lower, being dragged down by falling crude and declines in competing vegetable oils as well as concerns over slowing exports.

* Concerns developing again about Chinese complaints about US dumping DDGs.

* Yesterday’s EIA report showed weekly ethanol production at 1.0 mln bbl per day; up 7,000 bbl a day from last week.

* Weekly export sales out today.

* Informa will release corn and soybean planting estimates late this morning.

* Yesterday funds sold 10,000 corn, 5,000 soybeans and 4,000 wheat.

Commodity Weather Group Forecast

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In South America, very patchy showers occurred in southern/far northeast Mato Grosso, far southwest Goias, and southwest Minas Gerais in the past day. Showers remain limited in Center-West Brazil through most of the weekend, with chances for showers Monday to Wednesday and again at the end of the 6 to 10 day. While models have not shifted significantly on next week’s shower potential, the GFS guidance scaled back totals slightly in Mato Grosso (most areas between 1 and 2″) and has performed better recently. While this would still be marginally adequate to limit notable stress to the northeast 10 to 15% of Brazil corn/soy next week, any further reduction in rain totals would pose a greater risk in Mato Grosso as well. In addition, the activity will not ease long-term rain deficits in the region, and follow-up rain will be critical in the northern 1/3 of the soy belt to limit yield losses. A very active pattern continues to the south through the rest of the month, maintaining moisture surpluses but still mostly favorable. Fungicide applications will remain important to control elevated soy rust risks. The northeast 1/3 of the coffee may begin to slip drier again, but coffee/sugar otherwise remain stable. Argentina picked up rain in central/southwest areas in the past day and have no major crop threats over the next two weeks.

In the U.S., rains (.25 to 1.25″, locally 2.5″) favored the southern/eastern Delta and western fringes of the Southeast. Showers linger in the Southeast today. After a dry weekend, rains in the first half of next week favor Delta/Midwest soft wheat, but wetness threats remain isolated as heavier amounts are very limited. An event early in the 11 to 15 day is still expected to produce heavier rains in the Delta that poses the risk of localized standing water but would benefit much of the drier eastern Midwest. Unseasonable warmth keeps Plains/Midwest winterkill threats minimal in the next two weeks.

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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