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Morning Outlook

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Overnight Highlights

* Overnight markets have corn +1, soybeans +4, wheat +2-4, crude oil -.35, dollar +.23, gold +6.0 and the Dow -50.
* Continued short covering in corn and wheat along with fresh fund buying in soybeans have overnight grain markets supported.
* Kansas wheat was rated 57% G/E, up 1 from last week and up 16 from last year. The market is debating the impact of the cold weather and persistent dryness in the west, but good crop condition ratings and plentiful global supplies continue to weigh on rallies.
* Malaysian Palm Oil was higher overnight, continuing the support for the soy oil market which put in 8 ½ month highs overnight.
* Argentina said its Feb crush rate was 3.15 mln mt, nearly double last year thanks to the devaluation of their peso and lowering of export taxes encouraging farmer selling. Argentina is currently offering soy oil cheaper than the US Gulf, but not yet betting Brazilian meal prices.
* Cattle market expects continued pressure today following Monday’s fund liquidation selling. Yesterday the choice cutout was down $2.00 and select was off $1.66.

Commodity Weather Group Forecast

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In the U.S., showers were limited to the Pacific Northwest in the past day. A storm will track from the C. Plains into the northern/eastern Midwest and TN Valley from tonight into Thursday, with the best chances for snow in the upper Midwest. Another event tracks into parts of CO/KS by late in the weekend and then heads eastward, with another event late in the 6 to 10 day before drier trends dominate. Relief potential remains very low in the southwest Plains through the next two weeks, allowing building dryness concerns for 40% of the hard red wheat belt. In addition, a cold shot on Monday/Tuesday mornings will need to be watched. While snow may protect much of west-central KS and the CO foothills again with this system, the southwest Plains could see a close call. Models are not currently cold enough to cause damage, but the poor model performance with the freeze event last weekend in the southwest Plains does suggest that the forecast will need to be watched closely for many of the same areas. While showers and occasional cool downs will cause some slowdowns to early fieldwork in the Midwest/Delta during the next two weeks, the wettest weather is limited to the Great Lakes, southern Delta, and Southeast. This will allow many of the wettest fields in the northern Delta and OH Valley to continue to drain favorably in the next two weeks.

In South America, rain (.25 to 1″, locally 2″) favored northern Mato Grosso and northern Rio Grande do Sul yesterday. The main surge of rain starts Thursday and expands across the entire safrinha corn belt through the weekend, easing moisture shortages. The rains will stall soy/first-crop corn harvest, but flooding should remain isolated. Robusta coffee areas continue to be stressed, as rains fail to reach the area in the next 10 days. Argentina was dry yesterday and remains so until rains return late next week. In the interim, corn harvest pace should pick up, as will early soy harvest.

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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