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Morning Outlook

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Overnight Highlights

·         Interior cash basis levels for corn have firmed in the past week, suggesting that farmers are still slow to sell and merchandisers have a desire to keep the supply chain moving as winter has quickly approached.

·         Ethanol margins are still positive, and could be another reason why basis has firmed. Weekly U.S. ethanol grind data will be out later this morning.

·         Soybeans and soymeal are weaker again this morning as rumors continue to swirl about some soy meal cargoes being switched from the U.S. to South America as their prices remain at a steep discount to U.S. prices.

·         Export demand for both corn and wheat remains poor at current price levels, and feed wheat purchases from Europe into the U.S. confirm that.

·         The U.S. Dollar isn’t providing support for exports as it continues its trek higher, making our physical commodities more expensive to World buyers.

·         U.S. Mid-west weather forecast calls for temps to remain at or below normal, and precipitation around normal as well. Area with snow cover after the recent weather event will be gearing back up to finish harvest in the coming week.

·         Estimates for Friday’s Cattle-on-Feed Report suggest that placements will be down 4% from a year ago as pricey calves have discouraged feed yards from replacing aggressively. This, coupled with already tight numbers will likely continue to support the market in the near-term, and winter weather could fuel the fire.

Commodity Weather Group Forecast

In the U.S., dry weather dominated yesterday and continues for 2 more days, allowing some recovery of late harvest in the Delta. However, weekend rains and now a potential increase in rains in the eastern Midwest/Delta next week could extend delays longer for corn/soy/cotton harvest and late wheat seeding. Snow risks are still limited but do exist in the western Midwest next week and could further set back corn harvest. Colder than normal Midwest temperatures hamper late wheat germination. The Euro still shows a possible winterkill risk late in the 6 to 10 day for the Plains, but confidence remains very low. Most Midwest corn harvest finishes up this week except WI/MI. Colder than normal Midwest temperatures continue to hamper late wheat germination and threaten acreage loss in up to 10% of the belt. The latest Euro is quite cold at end of the 10-day period for Plains wheat, but winterkill threats are low given a lack of other model support.

 

In South America, scattered thundershowers in central/southern Argentina overnight favored southern Cordoba, northwest Buenos Aires, and far southwest Santa Fe most notably. Rains diminish as exiting the east this morning but rebuild in the north tonight, with another round of scattered showers in the south Monday and again next Friday. In areas that do not have excess moisture, fieldwork should still progress with only minor delays, but areas of long-term surplus moisture in the southeast 1/3 of the wheat belt and 20% of corn/soy will continue to run into concerns in poorly drained fields. A more notable rain event is possible in the 11 to 15 day, although confidence remains low. 90s continued in the west yesterday but now moderate.

 

Brazil rains will become widespread from Friday through next week after the recent unusually drier break. This will aid crop conditions in nearly all areas. CFS model guidance remains wetter in central areas into the 16 to 30 day and could pose the risk for pockets of too much moisture, but the threat is limited given recent wet model biases for interior Brazil.

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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Samuel Hudson | Market Strategist
WATER STREET ADVISORY® | www.waterstreet.org
(309) 680-1200 | shudson@waterstreet.org

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