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Morning Outlook

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Overnight Highlights

* Overnight trade has corn +1/4, soybeans +1, wheat +2, crude +.64, dollar +.10, gold even and the Dow +95.

* Slow news and light volume in overnight trade. User pricing and higher energy providing some support while higher palm oil for the fourth day is supporting soy oil.

* Trade will continue to watch north Brazilian rain forecasts. Current expectation is for scattered showers and more significant relief to come near the new year.

* Argentina offering corn below US prices from January through April.

* Argentine peso has firmed some; now at 13:1 USD vs last week at 14:1.

* Quarterly Hogs and Pigs report out this afternoon expected to show hogs/pigs at 102 percent of a year ago level.

* Tuesday’s Cold storage report showed Nov 30 pork stocks at 561.87 mln lbs vs expected 678 mln lbs and beef stocks at 510.48 mln lbs vs expected 535 mln lbs.

* Tuesday funds sold 7,500 corn, 5,000 soybeans and 4,000 wheat.

Commodity Weather Group Forecast

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In South America, scattered showers occurred in north/southwest Mato Grosso, north Mato Grosso do Sul, and central Goias in Brazil in the past day, with more general rains in south/central Rio Grande do Sul. Scattered showers are still likely to favor Mato Grosso in the next two days. Showers of significance finally resurge across the north beginning New Year’s Day and remain active through the 11-15 day easing moisture stress that is currently leading to yield loss in as much as 20% of the corn/soy areas mainly in central Mato Grosso, Tocantins, eastern Goias, northern Minas Gerais, and Bahia. Rains in southern Brazil remain frequent and locally heavy over the next 10 days keeping rust concerns widespread for a third of the soy belt from Parana south to RGDS. Flooding should remain localized in RGDS and S. Parana. A drop off in rains is likely in the 11-15 day as the main showers shift north allowing needed but likely brief drying. Argentina picked up more rains in south Cordoba, far south and northeast Santa Fe, north La Pampa, central and north Buenos Aires in the past day. Showers linger in the east third of the corn/soy area today but then taper off until the latter half of next week when another extensive rain event is likely to cross the region. The break in rains allows wetter areas in southern Cordoba, northern Entre Rios, and northern Santa Fe (15 to 20% of corn/soy) to drain. Wheat harvest will benefit from the break in rains over the next week.

In the U.S., rains (.25 to 1.25″, locally 2.5″) covered the Southeast wheat in the past day. Showers are frequent in the Midwest/Delta through Saturday but the a strong storm Sunday/Monday generates heavier rains across the eastern Plains/ Delta/Midwest wheat areas with flooding likely in south MO/south IL/north AR. Heavy snow (6 to 12″+) is likely in west/central Plains, protecting wheat but stressing livestock. Cold pushes Plains/ Midwest wheat dormant; winterkill threat 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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