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Morning Outlook

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Overnight Highlights

·         China’s third quarter gross domestic product came in at 7.3% growth, above projections of 7.2%, but still the slowest quarter of growth since early 2009.

·         The dollar dipped lower initially overnight, but is now rallying as it rides the 40-day moving average higher. As a result, commodity prices are generally well-off their session highs.

·         The dollar’s strength came as Europe’s central bank prepares its own version of a bond-buying program to stimulate the region’s economy, which is currently on the cusp of another recession. The bond-buying program is expected to pressure the euro versus the dollar.

·         Wheat prices firmed through the night on an Egyptian snap tender to buy wheat for late November delivery. French wheat will likely be favored, with U.S. export slots dedicated to soybean and corn shipments during the period, but global demand is supportive nonetheless.

·         Soybeans found modest support overnight from this year’s slow harvest, which was pegged at 55% as of Sunday, up from 40% the previous week and matching trade expectations, but down from the five-year average for the week of 66%.

·         Corn harvest progress as of Sunday reached just 31%, up 7 points on the week, but falling short of trade expectations of 34%.

·         The slow harvest progress to this point amid strong usage patterns means that the market has to find storage space for about a billion bushels less of this year’s harvest, versus a rapid harvest pace.

·         Light showers yesterday continued to hamper harvest progress in the eastern quarter of the Midwest.

·         Showers shift to the west on Thursday, and again on Monday, with generally light totals.

·         Fairly extensive rains in Brazil’s corn/soybean belt this week are expected to leave just 15% of the region with lingering dryness.

·         Showers continue to benefit Russian wheat this week, but a strong cold outbreak next week is expected to limit the crop’s ability to respond to the needed moisture.

·         Southern Australia to remain dry the next 10 days, keeping the crop under stress during grain fill.

Commodity Weather Group Forecast

In the U.S., light showers yesterday still slowed harvest in the eastern 1/4 of the Midwest. Showers shift to the west on Thursday and again next Monday. Amounts will be generally light and only result in minor interruptions, allowing corn/soy harvest to improve. Showers are more likely to be widespread in the 11 to 15 day, but damage potential is low. Delta/Southeast harvest remains very good in the next 2 weeks. Pacific Northwest rain potential is better this week, aiding early wheat growth.

In South America, thundershowers occurred in southwest Mato Grosso, southern/western Mato Grosso do Sul, northeast Goias, and parts of central Minas Gerais in the past day. Showers since the weekend have now brought at least .50” of rain to over 1/3 of Brazil coffee/sugar, with a few lingering showers in the northern parts of the coffee belt into Wednesday and another chance this weekend/early next week.

Rains then expand in the southern 1/4 of the belt in the 11 to 15 day. The 6 to 15 day as a whole has trended wetter due to model trends, and wetter forecast risks remains. However, our forecast is still not as wet as the very aggressive GFS model. About 1/3 of coffee/sugar areas would be at most risk for persisting dryness (reduced from 1/2 yesterday), mainly in northern Sao Paulo and nearby sections of Minas Gerais. Fairly extensive rains in the corn/soy areas should limit germination concerns to 15% or less of the belt.

Argentina still sees a widespread rain event early in the 6 to 10 day but otherwise mostly quiet conditions. While the rains will slow early corn seeding and maintain disease concerns for less than 1/4 of the wheat belt, the lack of more frequent showers will keep concerns limited.

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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