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Morning Outlook

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Overnight Highlights

·         The dollar surged to a new four-year high overnight and stock futures pushed higher as Wall Street anticipates a Republican sweep to result in more of a pro-business agenda. Strength of the dollar was amplified by weakness in the euro ahead of tomorrow’s European Central Bank meetings.

·         The strong dollar facilitated broad-based selling of the commodity sector, amplifying losses in the grain and oilseed complex on weakening fundamentals.

·         The flow of new-crop corn and soybeans is increasing as harvest advances and storage fills up, with charts posting additional sell signals ahead of next Monday’s USDA crop report that is expected to show larger crops as big crops get bigger.

·         Egypt released another snap tender to buy wheat late Tuesday, but U.S. wheat is not expected to win any of the business for mid-December delivery.

·         Rains over the next week are expected to resolve dryness issues that have delayed planting in central and northern Brazil. Soybean planting progress is pegged at 29% currently, down from 48% at this time last year.

·         The delays are not expected to impact soybean yields, but will put safrinha (second-crop) corn at greater risk, pushing pollination back by 6 to 8 days into the normal dry season, while extending the U.S. soybean export season.

·         Argentine grain inspectors went on strike today, while union members returned to work at a Cargill crush facility.

·         China’s soybean imports are expected to jump 38% as end users rush to secure cheap U.S. new-crop supplies.

·         A few showers Thursday, and again Saturday, will continue to hamper harvest efforts in the eastern Midwest, but drier trends next week should facilitate active harvest progress as a surge of cold air pushes the storm track south.

·         Next week’s cold wave is expected to push half of the Plains and a quarter of the Midwest wheat crop into dormancy.

·         Widespread rains are expected over the next 15 days to erase lingering dryness in areas of central and northern Brazil.

Commodity Weather Group Forecast

In the U.S., rains were .25 to 1.5” (locally 2.5”) in the southeast quarters of the Plains and Midwest and the northern 1/4 of the Delta yesterday. A few showers Thursday/Saturday still slow the eastern Midwest harvest, but drier trends in the Midwest/Delta next week should speed harvest. Cold still looks likely to push Midwest wheat into dormancy by mid-month, cutting short establishment and leaving 1/4 of the belt more vulnerable to winterkill this season. The northern 1/2 of Plains wheat could go dormant, with some drier areas also underdeveloped.

In South America, scattered showers in the past day favored northern/southwest Mato Grosso, southern Goias, eastern/northwest Mato Grosso do Sul, western/southeast Sao Paulo, far western Minas Gerais, Santa Catarina, and western/southeast Parana. Brazil showers linger in central areas for the next 2 days and spread from south to north again late Thursday through Monday, continuing in the north through much of the rest of the 15-day period.

Lingering dry patches in central/northern Brazil diminish, and very few crop concerns are anticipated. While CFS 16 to 30 day guidance is wetter today in the north, rains are more likely to ease late this month to limit excess moisture concerns.

Argentina is favorably drier this week for wet spots in the south, with showers limited to light activity on Friday. While timing and exact placement are in debate among the models, at least two rain events appear most likely for the 6 to 15 day, favoring the south/west. This may continue to slow late seeding (15% of corn) and to maintain disease threats (over 1/3 of wheat) in the south.

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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