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Morning Outlook

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Overnight Highlights

·         Global stock markets fell overnight after data showed that Chinese factory production gained 7.2% from the previous year, falling short of pre-report expectations of 7.5%.

·         Crude oil drops to $58.80 per barrel overnight on another round of reductions in demand estimates as the global economy slows.

·         The dollar pushed lower pushed lower in profit taking after its most recent surge fell short of taking out the March 2009 high.

·         March corn hit buy stops above $4 in thin trade volume overnight, propelling prices to their highest level since July 17, with the rally stopping short at the July 17 high of $4.07. The rally will now need to be tested in day trade volume.

·         Corn received a boost from reports that Ukraine will be unable to fulfill contracts to delivery about 8.7 million bushels of corn to China due to the military conflict in that region.

·         China would need to reverse its position on GMO corn for this to boost demand for our corn. It would likely simply shift to Brazilian corn.

·         China’s 2015 import quotas are unchanged from 2014.

·         Meanwhile, Turkey rejected 3 cargoes of U.S. DDGS after stepping up enforcement of its GMO laws, while another cargo was diverted to a third party.

·         The surge in corn prices pulled wheat with it overnight, followed by soymeal and soybeans.

·         Today is the last trading day for the December contract.

·         Northern Brazil is expected to be the wettest the next 5 days, but then rains shift south to central and southern areas, keeping conditions favorable for virtually all of Brazil’s corn and soybean belt.

·         Rains are expected to benefit nearly all of the U.S. winter wheat belt in the days ahead, although they may become excessive in the Delta.

Commodity Weather Group Forecast

In the U.S., light showers were limited to the western Delta yesterday. Rains are not as heavy in the C. & S. Plains early next week but are still extensive, and additional rains are likely in the 6 to 10 day to improve low moisture supplies and aid slow growth still occurring in the southern half of the belt.

The northern Midwest is likely to see some rains early next week slow late corn harvest in WI/MI, but snow is unlikely. Rains increase significantly in the Delta in the next two weeks and raise concerns for standing water problems, but drier than normal conditions over the past month should limit the threat in the short-term. Colder trends in the 11 to 30 day will need to be watched, but no winterkill risks are evident yet.

In South America, showers favored parts of Goias, north-central/eastern Mato Grosso, southeast Parana, Santa Catarina, far northern Rio Grande do Sul, and central/southwest Mato Grosso do Sul in Brazil yesterday and focus north after a few showers exit the south today. Showers then appear to likely shift focus slowly southward in the 6 to 15 day (and probably into the 16 to 30 day), including recently drier sections of southeast MGDS, western Parana, and RGDS. This should leave few areas with inadequate moisture later this month.

Argentine showers scattered across Cordoba, central Santa Fe, northwest Buenos Aires, southwest Entre Rios, and northern La Pampa yesterday. Northern corn/soy areas are wetter on Monday, but intermittent showers otherwise should be most common in the south/west over the next 2 weeks. Interruptions to late corn/soy seeding should remain fairly minor, although long-term moisture surpluses in Buenos Aires may still slow wheat harvest in poorly drained areas. 6 to 15 day heat on the GFS is not supported by other models and remains unlikely.

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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