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Morning Outlook

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Overnight Highlights

·         The euro fell and the dollar rallied to its highest level since March 2009 overnight on expectations that the European Central Bank will keep significant quantitative easing on the table this week.

·         The U.S. Federal Reserve is expected to discuss the timing of interest rate hikes at its next policy meetings on December 16 & 17.

·         Crude oil bounces on ideas that recent losses were overdone, but much of the rest of the commodity complex slips lower on the strength of the dollar.

·         Above factors add weakness to corn and soybean prices which are experiencing increasingly negative chart signals as traders focus on favorable South American weather and mounting global supplies.

·         Egypt released another snap tender to buy wheat late Tuesday, but U.S. wheat wasn’t even expected to be offered because it is too expensive following the recent rally, leading to double-digit losses in prices overnight.

·         Shower potential for dry areas of the Southern Plains see better shower potential for this week.

·         Previously wet areas of Argentina remain mostly dry this week.

·         Good rains are expected over Brazil crop areas over the next two weeks, with little risk of excessive moisture, raising yield prospects.

·         Some winterkill damage is expected in as much as 15% of FSU wheat this week due to cold temperatures amid light snow cover.

Commodity Weather Group Forecast

In the U.S., showers were minimal in most crop areas yesterday. Showers cross the S. Plains Friday and bring needed moisture to the dry wheat belt, with additional showers possible in the 11 to 15 day as well. Rains in the southern Midwest, Delta, and Southeast this weekend only slow very late harvest. A drier outlook for next week should allow much of the remaining harvest to be completed.

Prospects for germination in late-seeded wheat areas of the southern Midwest did improve beginning later next week, as warmer temperatures are supported by the latest models. Rains for Pacific Northwest wheat should continue to improve limited soil moisture levels in the next 2 weeks and aid germination in southern areas.

In South America, Argentina remains mostly dry this week, and a weekend frontal passage will mainly bring showers to the far south. This will include some of the wettest wheat areas in southern Buenos Aires, but the limited activity in much of the corn/soy belt should allow seeding to resume for several days ahead of a storm on Tuesday that favors central/northern areas.

Another break in showers is then expected, but odds are increasing for a widespread event just beyond the 15-day period that could threaten more notable fieldwork delays again. The greatest risks remain in parts of Buenos Aires/Entre Rios (1/3 wheat and 1/4 corn/soy), where notable long-term rainfall surpluses are in place.

Showers scattered through southern/western Brazil yesterday but were again much more limited than model guidance has suggested. While plenty of rain should still occur in the next 2 weeks, this wet model bias should continue over the next 10 days to limit risks of excess moisture.

Sub-zero Readings Leading to Winterkill Damage This Week in FSU Wheat Belt. Damaging cold was noted last night in the Volga Valley of Russia and likely expands into eastern Ukraine/far northern South Russia in the next 2 nights, with limited snow cover leading to patchy damage for as much as 15% of FSU wheat.

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

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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