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Morning Outlook

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Overnight Highlights

·         USDA-FSA released updated certification data early this morning. It revealed that farmers enrolled 85.842 million acres of corn and 81.392 million acres of soybeans in 2014, up 0.638 and 0.389 million respectively from the previous month.

·         The FSA data still leaves a gap with USDA-WASDE data ahead of the December certification deadline. The trade likely won’t know the significance of that gap, if at all, until January.

·         Readings dropped down into the -10 to -20 F range overnight in areas of western Nebraska and northeastern Colorado, likely damaging some wheat lacking snow cover in the region. Overall losses for the hard red winter wheat crop are estimated at 1 to 2%.

·         Up to half of the Midwest soft red winter wheat crop, as well as half of the winter wheat crops in Russia and Ukraine have less than desired development going into dormancy, leaving it at risk through the winter. That doesn’t guarantee a short crop, but it raises the risk factor of one.

·         The next week is relatively dry for the Midwest, other than the possibility of up to 4” of snow in southwestern portions of the belt this weekend.

·         Rains favor Brazil’s northern belt over the next two weeks, allowing central areas to dry out, before sliding south to replenish moisture supplies there, while allowing northern areas to avoid excessive wetness. Overall, the pattern is still seen is very favorable, although some will talk about the dryness in central areas near-term.

·         Tight soymeal supplies here in the United States continue to be the primary driver of the grain and oilseed complex.

·         Prices broke Wednesday on unconfirmed trade talk of Argentine vessels of soymeal headed to U.S. shores. The math works, but it is yet to be seen whether enough soymeal is coming our way to relieve the tightness and much of that is also tied to the scope of Argentine farmer selling, which appears to be picking up.

·         Factors to watch today – 1) whether we see more cancellations of previous purchases in this morning’s USDA weekly export sales report and 2) whether soymeal basis continues to hold strong, suggesting ongoing tightness.

Commodity Weather Group Forecast

In the U.S., only very light snow (1 to 2”) fell in eastern CO/western KS yesterday. Sub-zero readings in northeast CO, western NE, and far northwest KS are likely to lead to spotty winterkill, with 1 to 2% losses possible for hard red wheat. Midwest corn/soy harvest remains favorably dry over the next week, with only some light snow (2 to 4”) possible in the southwest corner of the belt. The Delta has been favorably dry this week, although showers late this weekend and late in the 6 to 10 day will slow very late soy/cotton harvest. Warmer 11 to 15 day trends in the southern Midwest could aid late wheat germination.

In South America, Brazil showers scattered across southern/eastern Mato Grosso, Goias, northwest/far southeast Minas Gerais, central/western Bahia, and far northern Mato Grosso do Sul yesterday, with just an isolated shower in central Cordoba in Argentina. Argentina will remain relatively dry until early in the 11 to 15 day, although a few showers scatter into central/southeast areas at the middle of next week. Wetness in Buenos Aires/Entre Rios corn/wheat areas will ease a bit, but the 11 to 15 day system could still keep some problem spots in 10% of the corn belt and 1/3 of wheat.

Rains have managed to miss many coffee/sugar areas in Sao Paulo/southwest Minas Gerais this week. Some relief is not out of the question at the end of the 6 to 10 day, but the best rains focus farther north/east in the next 2 weeks. This could cause stress to begin to rebuild, although 16 to 30 day rains are projected to return for much of central Brazil (including drier corn/soy in Parana over the next 2 weeks). Rains will continue to improve moisture supplies in corn/ soy areas of Mato Grosso, Goias, and Bahia.

Models Revert Back to Improved Shower Potential for Ukraine Next Week. Dryness is hampering wheat growth in 1/4 of Ukraine. Shower potential has improved in most models for next week in the area. Warmer than normal temperatures are likely to still allow the crop to put on needed additional growth.

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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