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Morning Outlook

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Overnight Highlights

* Overnight trade has corn even, soybeans +1, wheat +3, crude -.95, dollar -.40, gold +40.0 and the Dow -290.
* Grain markets mixed to higher this morning. Equity and energy markets lower. Dollar lower, gold higher and bond yields dropping on domestic economic concerns. SA weather favorable.
* USDA export sales report will be out this morning.
* US Ag Attaché in China raised his estimate slightly for 15/16 corn. He noted the management of growing and deteriorating corn stocks has become a serious challenge for the government, and one that may take multiple years to resolve.
* The EIA ethanol report showed production at 969,000 bbl per day, up 10,000 bbl per day from last week. Stocks came in a new all-time record high at 22.9 mln bbl.
* Wednesday funds sold 1,000 corn, 500 soybean and bought 4,000 wheat.

Commodity Weather Group Forecast

In South America, showers were patchy in Brazil yesterday but reached parts of northern Mato Grosso, east-central/far southern Mato Grosso do Sul, Parana, southern Sao Paulo, and near the Minas Gerais/Sao Paulo border. While by no means dry, rains continue to be too limited to pose any serious threats to either corn/soy harvest or port activities, and little change is likely during the balance of the month. A return of showers this weekend should be sufficient to keep moisture adequate for late soy growth in southwest Brazil, and recently drier coffee/sugar areas appear to also see a gradual return of showers in the next ten days to aid growth. A return of rain in the next week should also be too short-lived to pose a major concern for spots in the Northeast that still have a 30-day rain surplus due to January wetness. Argentina picked up showers in far northeast Santa Fe, La Pampa, and northwest Buenos Aires in the past day, but the heaviest rain was farther north. An active storm track through the next two weeks will include locally heavy rain at times, but the moisture will provide a net benefit to corn/soy yield potential as moisture needs near peak. This will include rain chances during the rest of this week, next Tuesday/Wednesday, and again next weekend. Highs are reaching into the low 90s in parts of the belt. While similar readings continue in the rest of this week and return in the 11 to 15 day, the lack of notable dryness will prevent any heat stress.

In the U.S., snow (1 to 2″) scattered across the western Midwest/northeast Delta yesterday. Arctic

air in the Midwest this weekend is not quite strong enough for winterkill, with only a minor risk in

northwest IL/OH. Rains occur in the Delta/Southeast early next week but should not pose

any problems for wheat, while light snow favors the Midwest on Sunday. Another storm in the 11

to 15 day in the S. Plains/Delta/Midwest wheat will produce mainly favorable moisture receipts.

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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