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Morning Outlook

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Overnight Highlights

· Overnight trade has corn +1, soybeans -3 1./2, wheat +3, crude -1.25, dollar even, gold -5, and the Dow -82.

· Chinese media reported that the annual high level meeting of the Central Rural Work Conference signaled it will proceed with market oriented reforms by cutting domestic corn production as well as increasing the pace of working off of corn and grain inventories.

· Soybeans under pressure in the overnight due largely to better than expected rains in Mato Grasso over the weekend, and more precipitation in the forecast.

· Intertek on Sunday pegged Malaysian palm oil product exports over the Dec 1 – 25 time period at 1.01 mmt, of 15.8% from their original estimate, and a reflection of the worsening El Niño conditions in the region.

· On Thursday, The Buenos Aires Grain exchange estimated that 68.9% of the wheat crop is harvested (last week 50.4%) with some 6.43 mmt of wheat collected out of the 9.5 mmt expected.

Commodity Weather Group Forecast

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In South America, showers over the past 4 days favored southwest Mato Grosso, southern/central Mato Grosso do Sul, western/southeastern Parana, and southern Sao Paulo in Brazil. Showers this week still favor the Center-South corn/soy areas with rains in western RGDS/Parana still likely to exacerbate wetness and soy rust concerns. Meanwhile, the dryness in the northern 20% of the corn/soy belt, especially in central/eastern Mato Grosso, will stress crops and shave off yield potential. Rains begin to scatter across these areas later this week but the main surge of rains that should ease moisture stress significantly are still on track for next weekend and remain active in Center-West Brazil all of next week. This should provide enough moisture for the crops to finish out in stable condition. Dryness in Center-South Brazil in the 6-10 day eases excess wetness but rains are likely to return in 11-15 day further fueling soy rust concerns. 6-10 day rains ease dryness in much of the coffee areas as well. Argentina was mainly dry the past 4 days. Highs in the 90s should linger today but then drop off the rest of the 10 day period. Rains favor the western half of the corn/soy area over the next 10 days but are limited in Buenos Aires province which could begin to stress vegetative crop growth in about 25% of the belt but would not immediately threaten yields. The dryness in Buenos Aires will aid wheat harvest while limited rains ease wetness for corn/soy in Santa Fe.

In the U.S., rains (1 to 3″, locally 10″) have covered most of the Midwest/Delta wheat and the southeast 1/3 of the Plains wheat in the past 4 days. Snow in the southwest Plains (4-11″, locally 18″) stressed livestock. Rain/snow/ice taper off in all wheat areas after today and allow waterlogged wheat areas to drain over the remainder of the next 10 days. Flood damage is likely especially in MO/northern AR/central IL. Cold pushes in Plains/ Midwest wheat remain too weak for winterkill.

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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