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Morning Outlook

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Overnight Highlights

·         Ag markets are mixed to mostly lower this morning coming out of the weekend, and into a shortened holiday week of trade. Markets will close Wednesday at 1:15 p.m., and re-open Friday morning at 8:30 a.m.

·         U.S. stock futures continue higher this morning after it was announced Friday that China’s Central Bank would cut its one-year loan rate by .4 percentage points, and one-year deposit rates by .25 percentage points, and also said it would allow more flexibility in deposit rates.

·         In addition to the Chinese rate cuts on Friday, European Central Bank President, Mario Draghi, said that the central bank will do what it must to raise inflation and inflation expectations as fast as possible, a sign that the ECB will step-up asset buying. These factors should keep support under the U.S. Dollar, and keep investors buying into the Holiday season.

·         Volume at the Board of Trade spiked on Friday as corn futures experienced a volatile trade, which led to a 7 cent price drop in the last 60 seconds as the December options went into expiration. It was the most actively traded minute in the last trading week as over 33,000 contracts traded hands.

·         The Obama administration postponed (surprise, surprise) a decision on 2014 biofuel use targets until 2015, which are already a year behind schedule and have been sitting at the White House, waiting to be signed for 3 months.

·         The monthly Cattle-on-Feed report was released after the close on Friday, seeing placements at 99% of last year, on-feed numbers at 100% of last year, and marketings 92% of last year. The report is viewed as bearish, with calls this morning looking for a price drop of .75 cents to 1.00.

·         Corn is down 2 cents this morning, soybeans are down 8-9 cents, and wheat is mixed as of this writing.

Commodity Weather Group Forecast

In the U.S., rains expanded across the eastern 2/3 of the Midwest and the Delta/Southeast in the past 2 days (mainly .25 to

1.5”). Rains linger in the eastern 1/2 of the Midwest today, with light snow (2 to 4”) confined mainly to WI. The next significant showers are then likely to hold off until early next week, which should allow some late harvest progress to resume. A wetter pattern then will stall remaining harvest significantly. Warming next week could allow germination in late-seeded Midwest wheat areas and will minimize winterkill risks, with needed 11 to 15 day rains also possible in the S. Plains.

 

In South America, a few light showers lingered along northern/eastern edges of Argentina on Friday, with showers in mainly southern/western Buenos Aires and southern Cordoba overnight. Showers exit far eastern areas today, but a substantial storm is forecast for this weekend. Another fairly notable one occurs the following weekend. While some progress has occurred recently, the wet weather will cause more notable interruptions to seeding to return to 1/4 of corn/soy in the south/east, with quality and yield threats also still a concern for at least 1/3 of wheat (particularly Buenos Aires).

 

Brazil rains were fairly widespread over the weekend but favored the western Mato Grosso (locally up to 7”) through Goias and northwest Minas Gerais. Rains this week and again later in the 6 to 10 day may cause localized excessive rainfall in Sao Paulo/ Minas Gerais/northern Mato Grosso do Sul/Mato Grosso/southern Goias, but rain totals do appear to start to tail off in the 11 to 15 day. Widespread showers will otherwise favor crop development, with very few gaps in coverage expected.

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

Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK involved in trading futures and or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL. This information is provided freely and is NOT in the capacity of a trading advisor. NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. Information provided is not to be construed as an offer to sell or solicitation to buy any commodity or security named herein.

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