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Morning Outlook

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Overnight Highlights

·         Markets are slightly higher this morning on some back-and-fill action after the weakness seen yesterday. Not much follow-through selling was seen, but the damage on the charts was noticeable.

 

·         December options expire tomorrow. The $3.50 and $3.60 strike prices for December corn still hold a LOT of open interest – the $3.60s have around 24,000 options open, while the $3.50s have around 31,000 options open. If the December futures market begins to approach these figure into tomorrow, things could get interesting as traders will look to use the futures market to lay off their risk on those options.

 

·         First Notice Day for December futures will be next Friday.

 

·         Exports will be out later this morning, around 7:30 a.m. – expectations are to see corn exports at 500,000 – 750,000 MT, soybeans at 700,000 – 1,000,000 MT, and wheat at 250,000 – 500,000 MT – corn and wheat have consistently missed the targets as of late. Expectations for soy meal are steady as some expect cancellations – if realized, this could weigh on the soy complex as well.

 

·         Demand is in question for corn and wheat, and that led to some liquidation yesterday from fund managers. The export market is dismal, and this could continue to weigh on the markets until we’re priced better on the World market. Corn demand for ethanol, however, was reported strong yesterday.

 

·         Ethanol production for last week averaged 970,000 barrels per day, which was up 2.54% on the week, up 7.30% versus a year ago; stocks totaled 17.335 mil barrels (down 2.09% on the week, up 14.93% versus a year ago); corn use totaled 101.85 mil bushels versus 99.33 mil last week, and versus the 99.4 mil needed to meet USDA projections.

 

·         Monthly Cattle-on-Feed Report will be tomorrow, with expectations to see continued tightness with placements down 4% compared to this time last year, along with lower marketings.

·         As of this writing, corn futures are 1-2 cents higher, soybeans are 6-7 cents higher, and wheat is mixed.

·         U.S. stock futures are lower this morning after disappointing economic indicators from Europe and China, which suggests slower growth. Stocks also await information here in the U.S. in regards to manufacturing, consumer prices, and existing home sales.

Commodity Weather Group Forecast

In the U.S., light snow was limited to MI yesterday. Late harvest in the Midwest/South will make some headway in the next two days, but rains look likely to cover much of the Delta and all but the western 1/4 of the Midwest this weekend. Models are at odds next week, but the most likely outcome is for rain in the South and light snow in the eastern Midwest to further slow late harvest late next week. Midwest temperatures remain too cold for late wheat germination in the next 2 weeks. The Euro model still shows a winterkill risk late in the 6 to 10 day for the C. Plains, but confidence remains very low.

 

In South America, light showers were noted in southern/far northern Cordoba, northern Santa Fe, Entre Rios, and eastern

Buenos Aires in Argentina yesterday, with heavier activity mainly limited to the far north and near the coast. Showers will diminish today, but scattered storms return to the south and far north on Monday. Broader coverage is then possible next weekend with a stronger system. Interruptions to corn/soy seeding and northern wheat harvest will be short-lived for many areas, but southern/eastern Buenos Aires and Entre Rios (20% corn/soy and 30% wheat) will likely continue to struggle in poorly drained fields with seeding delays and wheat quality/yield losses due to long-term moisture surpluses in addition to these occasional showers.

 

Brazil showers expanded in mainly central/ northwest Mato Grosso and southern/western Mato Grosso do Sul yesterday, with spotty rains into southern Brazil as well. Widespread rain from tomorrow through next week will ensure favorable late spring crop development but will slow late wheat harvest.

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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