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Morning Outlook

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Overnight Highlights

·         The Bank of Russia raised its key interest rate to 10.5% overnight, the fifth increase this year. Yet that was still insufficient to stem the ruble’s worst rout in 16 years. Falling crude oil prices are adding to Russia’s economic crisis.

·         The dollar dropped to its lowest level since December 1 overnight in follow-through profit taking, but has since erased most of its session losses, while crude oil is posting a modest bounce this morning, trading back above $61 per barrel.

·         Plains’ wheat is expected to benefit from widespread rain early next week.

·         The focus of Brazilian rains is expected to shift to southern areas in the 16 to 30-day period, but current models suggest that rains will provide good moisture to central and northern areas of the crop area over the next two weeks.

·         Near-term supplies of corn and soybeans are tight amid strong demand and slow farmer selling, but basis is beginning to break in some locations as grain movement increases.

·         The futures market is trying to find the balance between those tight upfront supplies and expectations of a significant increase in another 60 to 90 days. Growing conditions in Brazil remain nearly ideal to this point.

·         Egypt released another tender to buy wheat late Wednesday, but U.S. wheat is not expected to be competitive. In fact, the drop in the Ruble should help Russia in the tender.

·         Wheat prices continued to lose ground overnight, while corn and soybean prices bounced modestly from Wednesday’s losses.

·         USDA is scheduled to release its weekly export sales report at 7:30 a.m. CST this morning, showing whether soybean demand is showing signs of slowing. Traders expect it to reflect demand for 26 to 37 million bushels of soybeans, 31 to 39 million bushels of corn and 9 to 16 million bushels of wheat.

·         We are entering the seasonal period when traders begin to square their books to show profits for the year ahead of taking extended time off for the holidays, which often times means erratic trade in thin volume.

Commodity Weather Group Forecast

In the U.S., mostly dry conditions occurred yesterday. Models have trended even wetter for the C. & S. Plains early next week. This wetter trend carries through the 6 to 15 day period as well and should improve low soil moisture reserves. The northern Midwest remains mostly dry, aiding late corn harvest efforts in WI/MI. Rains favor the Delta/Southeast in the 6 to 15 day period. The rains in the soft red winter wheat will need to be watched but, given drier than normal conditions over the past month, wetness problems would be slow to develop.

Mild temperatures over the next week may still allow some additional germination for late-seeded soft wheat in the southwest Midwest but will be short-lived. Cooler trends return in the 11 to 15 day, but no winterkill risks are expected. Showers in the Pacific Northwest wheat improve soil moisture next week.

In South America, showers favored central/northwest Mato Grosso, southern Goias, western Minas Gerais, central/eastern Sao Paulo, northeast Mato Grosso do Sul, and central/northeast Rio Grande do Sul in Brazil yesterday. Rains continue to slowly fill in over the next 10 days, with recently drier spots in Parana/southern MGDS most likely to see more sporadic activity. However, 11 to 15 day rains are expected in these areas.

Showers were limited to far northern Argentina yesterday, but a few showers scatter from mainly Cordoba into Buenos Aires early this weekend and again Tuesday, with broader coverage but similar placement late in the 6 to 10 day. Prolonged wetness issues in parts of the Buenos Aires wheat belt will linger, but the pattern will not be wet enough to seriously impede late corn/soy planting. Showers most likely shift focus to Argentina and southern Brazil in the 16 to 30 day, so near-term rains in the rest of Brazil will be important to recharge moisture.

Cold Surge in China Wheat Pushes Crop Into Dormancy, But Winterkill Not Expected. Wheat has made good growth in the past 2 months, and the colder pattern will help push the crop safely into dormancy.

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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