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Morning Outlook

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Overnight Highlights

·         The dollar reached new highs for the move overnight after data showed that Japan’s economy shrank 1.9% in the third quarter, but the greenback remains just below the March 2009 high at this point.

·         Crude oil fell once again after Chinese trade data failed to meet expectations and on last week’s OPEC comments that it would not curtail production, with stock futures lower.

·         China imported 222 million bushels of soybeans in November, up 47% from the previous month in an attempt to meet seasonal demand. Record imports of 276 million bushels are expected in December. Year-to-date imports are up 12% from 2013.

·         China produced an 8.49 billion-bushel corn crop in 2014, according to government data, down from 8.58 billion the previous year due to drought in northeastern provinces.

·         Trade reports indicate that 2 cargoes of DDGS have arrived at southern Chinese ports with no problems to this point, suggesting that rumors of easing restrictions may have validity.

·         Corn prices remain supported by firming basis as farmers refuse to sell, while soybeans come under pressure again as traders look ahead to a big South American harvest.

·         Wheat prices worked lower again on a renewed focus on large global supplies and slow export demand for U.S. wheat.

·         South American weather remains very favorable for high yields over the next couple of weeks.

·         USDA will be updating its supply and demand balance sheets on Wednesday morning.

Commodity Weather Group Forecast

In the U.S., a few very light showers (<.25”) occurred in the northwest Midwest late in the weekend, but most of the rain favored the southern Midwest/northern Delta/far southeast Plains on Friday (.25 to 1.5”, locally 2.75”). A quiet pattern this week aids late harvest in the Midwest/South, with storms early next week and again in the 11 to 15 day then favoring the S. Plains/Delta.

Only brief interruptions are expected to any late harvest areas. Warmer than average temperatures will aid drying in between showers and will also allow for some late germination in the next 10 days for soft wheat in the southwest Midwest along with added fall growth in the S. Plains. However, driest sections of the C. Plains are less likely to see showers.

In South America, weekend rains favored parts of far northern Mato Grosso do Sul, Mato Grosso, Goias, central/northwest Minas Gerais, and western Bahia in Brazil, and widespread rains remain likely to benefit crop development in the next 2 weeks. Central/southern areas are not as wet in the 6 to 10 day, and risks for excess moisture remain limited to the north and relatively minor given wet model biases lately.

Argentine showers occurred from central/northeast Buenos Aires into eastern Cordoba, Santa Fe, and Entre Rios over the weekend. Showers return at mid-week to central/northern areas, but breaks in the pattern should then allow late corn/soy seeding to improve. Rain chances are a bit better in the 6 to 15 day for southern areas again. While heavy amounts are not likely, long-term moisture surpluses remain in the southeast 1/3 of the wheat belt, and the showers will keep risks elevated for quality declines.

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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