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Morning Outlook

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Overnight Highlights

·         The dollar rallied to its highest level since October 6 overnight, following the Federal Reserve’s hawkish statement suggesting that it will move toward monetary tightening next year.

·         European stocks moved lower and U.S. stock futures point toward a lower open as well in follow-up trade to the hawkish Fed statement.

·         December soymeal rallied to just below its May highs as robust export demand combines with poor rail logistics to put a squeeze on soymeal, which is contributing to a rise of soybean and corn prices as well.

·         Soymeal futures are pulling back after failing to challenge that area of chart resistance, with the December contract probing below $400 once again.

·         The December corn rally was stopped short at its August high of $3.81 early this morning, with selling emerging to fall back from the area of resistance.

·         Chicago wheat pushed above resistance at $5.40 on the December chart overnight, but it came off its high when failing to push through the 100-day moving average at $5.4575.

·         USDA’s weekly export sales report for the week ending October 23 is scheduled for release at 7:30 a.m. CDT this morning.

·         Much of the recent gains in grain and oilseed prices took place after October 23, but the rally was already making U.S. corn and wheat some of the most expensive in the world at the time. This week’s rally in the dollar makes U.S. grain even less competitive.

·         Light showers are expected to again slow harvest progress in the northeast quarter of the Midwest tomorrow.

·         More substantial delays are expected next Tuesday/Wednesday, focusing on the Southern Plains, Delta and southern quarter of the Midwest.

·         Rains in previously dry areas of northern Brazil have been under-performing forecast models, suggesting that up to a quarter of Mato Grosso soybeans may see lingering dryness.

Commodity Weather Group Forecast

In the U.S., the Midwest/Delta dried yesterday. Light showers in the northeast 1/4 of the Midwest tomorrow cause brief harvest delays, but the main event next Tuesday/Wednesday focuses on the S. Plains/Delta and southern 1/4 of the Midwest. Damage risks are limited, as much of Delta harvest will be complete. S. Plains wheat will benefit from improved moisture, and flooding potential is low. Pacific Northwest wheat is trending drier, but rains in the past week will keep growth stable.

In South America, showers were widely scattered in northern Brazil yesterday but did reach a few dry soy areas near the Goias/Mato Grosso border. Notable rains favored Entre Rios, northeast Buenos Aires, Santiago del Estero, Uruguay, and southern Rio Grande do Sul. While some guidance remains wetter than our forecast during the next few days in northern Brazil, the lack of showers in the past 2 days suggests that rains will remain more limited, and the 6 to 10 day was also drier.

This will allow up to 1/4 of Mato Grosso soy to hold onto dry spots, and follow-up rains will also be limited for coffee/sugar in northeast Brazil. While confidence is low, 11 to 15 day showers may still expand northward, focusing potential concerns on 1/3 of coffee and 15% of corn. Expanding rains in southern Brazil will slow spring seeding and wheat harvest, although severe wetness issues remain unlikely.

Argentina will be drier through the weekend, but showers favor the south next Monday and Friday as well as in the 11 to 15 day. While most of the rain focuses too far south to impact corn seeding, Buenos Aires wheat is at risk for expanding disease threats. Frost risks this weekend are diminishing though.

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

Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK involved in trading futures and or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL. This information is provided freely and is NOT in the capacity of a trading advisor. NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. Information provided is not to be construed as an offer to sell or solicitation to buy any commodity or security named herein.

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