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Morning Outlook

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Overnight Highlights

·         The U.S. dollar rallied to a one-week high overnight, but has pulled back from those highs over the past hour.

·         The broader commodity complex came under modest selling pressure from the stronger dollar overnight, including crude oil, which fell to a fresh four-year low.

·         A second healthcare worker has Ebola in the Dallas area. Whether justified or not, concerns are starting to build on Wall Street that fear of the disease will provide a drag on the U.S. and global economy, which would not support fund investment in the commodity sector. Dow futures suggest we could see triple-digit losses this morning.

·         Soybeans came under pressure from more advanced harvest pressure than expected after USDA reported that 40% of the crop was in the bin as of Sunday, above trade expectations of 31%.

·         Palm oil prices are trading at two-week lows, providing a drag for soyoil prices as well.

·         October FSA data showed that farmers certified additional acreage over the past month, but a million acres of corn and around 700K acres of soybeans remain in question. The data suggests that we could see additional acreage reductions for these two crops, but we simply do not know since some farmers have yet to certify.

·         Corn harvest as of Sunday came in at 24%; just below trade expectations of 25%.

·         Soybean harvest progress was very slow in wetter eastern areas of the Midwest, while drier eastern areas are roughly two-thirds complete.

·         Rains are expected to be very limited for the Midwest the remainder of the month.

·         Rains are expected to spread into dry areas of northern Brazil Tuesday to Thursday of next week, lingering in northwestern areas into the 11- to 15-day period.

Commodity Weather Group Forecast

In the U.S., rains persisted in corn/soy areas of the north-central/eastern Midwest yesterday, and significant rains overspread the Southeast. Showers will be very limited for the next 2 weeks, allowing Midwest/South harvest to get back on track. Plains dryness in the next 10 days should allow much of the last 1/4 of the wheat seeding to be completed and take advantage of improved moisture across the belt. Pacific Northwest wheat areas are still lacking moisture in the next 2 weeks, hampering early germination. Canadian spring wheat/canola harvest pushes to completion in the next 2 weeks, as rains remain limited.

In South America, showers occurred mostly from east-central Mato Grosso do Sul into northern Parana and southeast Sao Paulo yesterday, but very spotty areas in south-central Mato Grosso and western Argentina also saw an isolated shower. Rains expand in the southern 1/3 of Brazil tomorrow through the weekend and again in the 11 to 15 day, but a break in between should limit wheat quality concerns in Rio Grande do Sul.

Highs were well into the 90s/low 100s yesterday in northern Brazil and will continue through at least Monday. Showers spread into northern Brazil Tuesday to Thursday, lingering in northwest areas into the 11 to 15 day. This will aid early soy germination in key areas of Mato Grosso, while the best chances to the east focus on southeast Sao Paulo, northern/eastern Minas Gerais, and Espirito Santo.

However, at least 1/2 of the coffee/sugar is at risk to still be short-changed, with the risk for northeast Brazil to come in even drier. Our forecast shifts rains mainly south of coffee/sugar in the 11 to 15 day, and the CFS guidance is now more supportive of drier expectations in the 16 to 30 day for northern Brazil.

Entre Rios/Santa Fe will be at most risk for delays to early spring seeding due to occasional Argentine rain over the next 2 weeks, while wet wheat areas in Buenos Aires could still avoid much of the rain.

Morning Market Snapshot

 

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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Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY® | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

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