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Morning Outlook

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Overnight Highlights

·         President Obama is in China for talks this morning, where he’s touting a new agreement on CO2 emissions. The United States agreed to cut our emissions by 26 to 28% by 2025, if China will start to cut theirs by 2030. China also agreed to increase its non-fossil fuel share of energy production to 20% by 2030, which may increase emphasis on ethanol.

·         The dollar is modestly higher this morning, while crude oil is lower once again, hovering just above multi-year lows.

·         Soymeal has been the overall leader in this fall’s rally of the grain complex, based on tight supplies amid robust demand. December soymeal took out the October high of $408.50 overnight in thin volume, but pulled back when it failed to test the contract’s double-top contract high of $411.40 set in May.

·         The contract’s behavior in day trade volume this morning should be telling as to whether this market can sustain the rally, or begin to pull back. It traded to $411.10 before pulling back and is now several dollars below the contract high.

·         January soybeans traded to their highest level since August 11 on the overnight strength in meal, but also pulled back when meal failed to test its contract highs. The soybean contract has now retraced 50% of its late summer collapse, which is a significant area of decision for prices.

·         Wheat saw follow-through short-covering overnight as Arctic air sweeps across the Midwest, pushing wheat into dormancy before it has had a chance to fully develop a root system.

·         Corn was a reluctant follower overnight, consolidating higher near the top of its recent trading range.

·         Rains are expected to favor Brazil’s northern belt over the next two weeks, but then to filter south again in the 16- to 30-day period, limiting dryness concerns for central production areas.

·         Wheat faces a winterkill threat in western Nebraska and northeast Colorado tonight.

Commodity Weather Group Forecast

In the U.S., only very light showers (mainly less than .25”) fell in the eastern Midwest yesterday. Midwest corn/soy harvest makes good progress over the next 10 days, with only the southeast 1/4 to see significant showers (not until next week). Cold in the C. Plains could cause some winterkill in the NE Panhandle and northeast CO tonight. Delta dryness will allow soy/cotton harvest to near completion, but late harvest will be slowed by rains late this weekend and again at mid-week. Late -seeded soft red wheat in the southern Midwest will see cold hamper germination, encompassing nearly 10% of the belt.

In South America, Brazil thundershowers favored southern/eastern Mato Grosso do Sul, far southwest Sao Paulo, far northwest Parana, and parts of west-central Minas Gerais yesterday, while lingering Argentine showers were very light/widely scattered in Cordoba, southern Santa Fe, Entre Rios, and eastern Buenos Aires. While intermittent showers are possible in the south, the bulk of Brazil rains favor the north through the next 2 weeks.

The heaviest totals should focus from northern Mato Grosso into northern Minas Gerais but should begin to ease in the 11 to 15 day and then expand southward again in the 16 to 30 day. This should limit wetness concerns in the north, and the return of showers to central areas (particularly Parana) would be in time to avert significant concerns after a fairly dry next 2 weeks.

Scattered showers reach central/southeast Argentina at the middle of next week, but the broadest coverage arrives early in the 11 to 15 day. This would maintain surplus moisture in Buenos Aires/Entre Rios corn/wheat after some slight improvement in the near-term.

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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