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Morning Outlook

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Overnight Highlights

·         New York is dealing with its first Ebola case this morning, after a doctor who had been in Africa working with Ebola patients tests positive.

·         Equity and energy markets are lower this morning on a return of concerns that Ebola fears will hurt our economic growth.

·         Meanwhile, grain and oilseed prices are pushing higher on positive chart signals.

·         November soybeans traded to the $10 strike price overnight ahead of today’s expiration of options for the contract. Option open interest at the strike price is heavy, making it an attractive strike price for expiration.

·         Fundamentally, soybeans also find support by strong crush and export demand, highlighted by Thursday’s USDA big export sales report showing nearly 80 million bushels sold in the week ending October 16 amid slow farmer deliveries of harvested supplies.

·         Dry weather is expected across the Midwest through Monday, favoring active harvest progress.

·         Forecast models are lighter for next week’s Midwest rains, limiting harvest delays, followed by another 4 to 5 dry days for the region.

·         Rains are gradually increasing, and will continue to do so through the weekend, for previously dry areas of Brazil’s northern corn/soybean belt, providing good moisture for early corn/soybean establishment.

·         A cold push is cutting fall wheat growth short ahead of dormancy for the northern half of Russia’s wheat belt, leaving it more vulnerable to winterkill if the region fails to maintain typical snow cover this winter.

·         Dryness in the southern quarter of Australia’s wheat belt could cut exportable supplies by 175 to 200 million bushels from USDA’s current estimates.

·         The Federal Reserve monetary policy committee meets Tuesday and Wednesday next week, which could prove pivotal to continued money flow into the broader commodity sector.

Commodity Weather Group Forecast

In the U.S., rains (.10 to .50”) fell in the north-central Midwest yesterday. Dry weather dominates through Monday. Showers at the middle of next week are lighter in the latest models, limiting harvest delays for the Midwest as another 4 to 5 dry days then arrive. Interruptions to harvest in the South will mainly be at the middle of next week in the Delta. S. Plains wheat could see more beneficial 11 to 15 day rain. Pacific Northwest rain chances continue to improve wheat growth in the next 2 weeks.

In South America, showers in the past day favored western Mato Grosso and northern Mato Grosso do Sul, although isolated activity was noted farther east in northern Brazil and in southern Argentina. This included locally 2”+ in a few coffee/sugar areas in far northeast Sao Paulo.

Showers continue to increase for key northwest soy areas (particularly Mato Grosso) through the weekend, with frequent opportunities into early November to ease germination concerns and improve seeding progress in between showers. While many models continue to pose wetter risks in the 6 to 15 day for northeast Brazil as well, the best chance is from late Saturday through Tuesday. This will offer most corn/coffee/sugar areas amounts of .75 to 2” to ease dryness concerns to some extent.

The CFS trended drier in the 16 to 30 day in the north and is preferred, while the Euro shifted wetter. However, northeast coffee/sugar areas will remain more susceptible than northwest corn/soy to below normal rain.

Argentina will see widespread rain slow corn seeding early next week, but showers are limited otherwise. Rains will continue to cause 15 to 20% of wheat in southwest/eastern Argentina to maintain elevated disease risks.

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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