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Morning Outlook

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Overnight Highlights

·         The dollar rallied once again overnight, ahead of this morning’s highly-anticipated monthly jobs report. Wall Street expects it to show that the economy created 230,000 jobs in November, with the jobless rate unchanged at 5.8%.

·         Additional support for the dollar came from chatter that the European Central Bank is preparing a package of asset purchases for approval at its January meetings to stimulate the region’s economy.

·         Commodity prices lost value overnight as the dollar rallied on expectations that it will make our products less competitive on the global market.

·         Corn and soybean futures slip lower overnight with traders increasingly focused on favorable weather south of the equator.

·         Corn basis softened Thursday at some Midwest locations, while soybean bids were mostly steady to firmer.

·         U.S. wheat remained under pressure overnight as one of the higher-priced sources on the world market.

·         The trade expects next Wednesday’s USDA crop report to increases corn and wheat supplies by 19 and 10 million bushels respectively, while soybean stocks drop 23 million. However, supplies of all three remain at relatively high levels.

·         Argentina is expecting intermittent showers over the next two weeks, with the greatest wetness concerns in the southeastern third of the grain belt.

·         Rains expand again across Brazil in the 6- to 15-day period after a relatively quiet week, with growing conditions nearly ideal across the region.

·         Showers benefited areas of the Plains winter wheat belt overnight, with more expected in the 6- to 15-day period.

·         Milder conditions are expected across the FSU wheat belt the next two weeks, ending a cold-weather threat, with snow cover expanding next week to protect crops from future outbreaks.

Commodity Weather Group Forecast

In the U.S., light showers (.10 to .50”) favored KS/OK, the northern Delta, and the southern Midwest yesterday. Showers end in KS today but continue over the southeast 1/2 of the Midwest and northern 1/2 of the Delta. Dry weather then settles in for the next week, allowing harvest in most of the Midwest/Delta to finish. The bulk of the Southeast is favorably dry for harvest in the next 10 days.

Warmer conditions could still allow some germination in late-seeded wheat areas of the southern Midwest in the 11 to 15 day. Additional rains in the S. Plains late in the 6 to 10 day and early in the 11 to 15 day would benefit low soil moisture. Rains for Pacific Northwest wheat should continue to improve limited soil moisture in the next 10 days.

In South America, dry weather continues to aid fieldwork in the region, with reports now showing soy planting 60% complete (bulk of remaining acreage in Buenos Aires) and corn 53% complete (most of unplanted acreage in Cordoba). Wheat harvest is 51% complete, with very little harvest complete in Buenos Aires but many other areas nearly finished. Weekend rains will favor southern wheat areas, with additional scattered showers in Argentina next Tuesday/Thursday and again in the 11 to 15 day (albeit not quite as wet as yesterday). The rains will interrupt fieldwork, but the greatest concern will likely be for quality in the southeast 1/3 of the wheat belt that has seen a prolonged moisture surplus.

Brazil showers favored parts of Sao Paulo, southwest Goias, and northeast Mato Grosso do Sul yesterday. Limited rains this week are preventing any excess moisture concerns, and more general rains in the 6 to 15 day will ensure that dry spots do not develop.

Sub-zero Readings Last Night Over Snow Band in FSU Wheat Belt, Milder Pattern Next 10 Days. Potentially damaging cold last night remained over the 1 to 4” snow band in eastern Ukraine/northern South Russia. Patchy damage is likely in areas where snow cover was lightest. Snow cover should slowly expand next week.

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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