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Morning Outlook

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Overnight Highlights

* Overnight markets have corn +1, soybeans -1, wheat -1, crude oil -.15, dollar +.10, gold +13.0 and the Dow -80.
* Mixed trade overnight. Corn supported on dry weather threat to Brazil’s safrinha corn and talk of switching of corn to soybeans in the South US.
* Weekly export sales will be out this morning.
* This morning Brazil’s CONAB lowered their expected soybean crop size for 15/16 to 98.98 mln mt from the previous forecast of 101.18 mln mt. They raised the expected corn crop to 84.66 mln mt compared to the previous forecast of 83.52 mln.
* China’s Ag Ministry says they plan to reduce corn plantings by 8.2 mln acres by 2020 and that farmers in these areas will switch to crops like soybeans and potatoes.
* The USDA attaché office in Argentina put the country’s 16/17 corn output forecast at 31.5 mln mt as acreage is expected to expand by 1.0 mln hectares.
* The Ag Ministry in China noted they expect shortages of pork to ease because high breeding margins are encouraging a restocking at pig farms.

Commodity Weather Group Forecast

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In the U.S., showers favored central/eastern IL, northern IN, southwest MI, northern OH, and SC in the past day. Light and patchy rain/snow showers scatter around the Great Lakes into the weekend, but the next chance for extensive and locally heavy rains arrives in the southern Midwest/Delta Monday/Tuesday. This will be followed by similar rains that favor the southern Midwest/Delta at the middle of next week and in the 11 to 15 day, slowing southern corn/cotton/rice seeding again after a
beneficial break in the wet weather across soggy Delta fields that began late last week. Following intermittent Midwest cool shots (no wheat damage), temperatures rebound later next week and into the 11 to 15 day, aiding germination in areas that have been seeded. Each of the mentioned rain events will also track across Plains wheat, initially favoring northern CO, central/ southeast KS, and northeast OK to start next week but favoring TX at mid-week and much of the belt at the end of the 10
-day period. The combination of these events will help to ease dryness concerns, although confidence remains low regarding the specific storm tracks given a continuation of very erratic model solutions. Parts of southwest KS/southeast CO/northwest OK are at most risk to see lesser totals. The 16 to 30 day outlook remains warmer and is still wettest in the Plains/Gulf Coast.

In South America, Brazil rains (.25 to 1″, locally 2″) were confined to western Mato Grosso and southern Rio Grande do Sul yesterday. Showers favor the northern 1/3 of safrinha corn over the next 2 weeks. This allows dryness to expand to nearly 1/3 of the belt. Early safrinha corn pollination will begin to suffer yield declines in the latter 1/2 of the month. Argentina rains (.25 to 1″, locally 2″) were confined to the northeast corner of the corn/soy yesterday. Persistent rains keep harvest on hold in the northeast 1/4 of the belt, but limited showers through next week allow harvest to slowly resume elsewhere.

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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