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Morning Outlook


Overnight Highlights

********* Overnight trade is currently corn -1/2, soybeans +7, Chicago wheat +5, KC wheat +3, MPLS wheat +3, crude +.26, gold +1.6, and the US dollar +.11.

********* US weekly retail sales came in mixed this morning, improving 1.3% over last year but down 1.6% week on week.

********* Corn continues to hunt for a bottom through the 3.62 March contract low that it formed 2 weeks ago; failure to hold here could result in another leg lower with support most likely coming around the 3.42 area.

********* Soybeans rallied back overnight after yesterday’s large sell-off, largely due to repositioning and short covering; forecasts have not changed for more favorable weather in Mato Grasso.

********* Wheat continues to remain supported by recent storms in the Delta and Mid-South could damage a wheat crop that was not yet dormant when rain and potential freezing conditions set in.

********* Flooding along the Mississippi has resulted in crashing river basis with no grain able to move until at least the second week of January when the waters should recede.

Commodity Weather Group Forecast

In South America, rains in the past 24 hours favored southeast Mato Grosso, eastern Mato Grosso do Sul, northern Parana, Sao Paulo, and southern Goias in Brazil. Showers favor the Center-South corn/soy areas the next 3 days but gradually increase in the Center-West with a notably more active pattern expected there through much of next week. The rains are likely to extend back into northeastern dry areas by early next week and ease stress on minor corn/soy areas as well as key coffee areas. This should largely end moisture stress for the northern 20% of the corn/soy belt, especially in central/eastern Mato Grosso, halting yield loss. Limited rains in Center-South Brazil beginning next weekend could extend into the 11-15 day period based on latest model input. This would help excessively wet fields across RGDS/Parana to drain and ease soy rust outbreaks. An upturn in rains is still likely later in the month given the El Nino pattern. Argentina rains were confined to northern Santa Fe, southwestern Buenos Aires, and far north Cordoba in the past 24 hours. Highs were still in the low-to-mid 90s yesterday but should fall back to upper 80s to lower 90s the rest of the 10 day period. Rains continue to favor the western half of the corn/soy area over the next 10 days. Our forecast still limits the expansion of rains in Buenos Aires which could lead to moisture shortages for 20% of the corn/soy belt but many models are trending wetter which poses a risk to our forecast.

In the U.S., rains (.25 to 1.25″, locally 2.25″) covered the Midwest/northeastern 1/2 of the Delta wheat in the past 24 hours. Snow (2-4″, locally 8″) was focused in northwestern fringes of the Midwest wheat. Drier weather allows standing water to drain over next 2 weeks, easing damage extent. However, damage is likely to be notable in southern MO/northern AR/central IL. Colder conditions over the next 2 weeks are not strong enough for winterkill in Plains/Midwest wheat.

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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