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Morning Outlook

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Overnight Highlights

·         Crude oil plummeted to $53.80 per barrel overnight on fears that global demand is falling amid an increase in supply from OPEC and U.S. fracking. It’s the lowest level for crude oil prices since May 2009.

·         The dollar dropped sharply in chart-related profit taking overnight, falling to nearly three-week lows.

·         European stocks fell for the seventh day on fears that the region is slipping into recession.

·         The Russian ruble dropped to 60 per dollar for the first time on record yesterday. Russia pushed its key interest rate to 17% overnight, up from 10.5% previously, in an attempt to save the ruble. It rebounded briefly, but then plummeted to 80 per dollar in overnight trade.

·         A cheap ruble further increases the price advantage of Russian wheat over U.S. sources.

·         The continuous commodity index dropped to its lowest level since 2010, while the CRB index dropped to its lowest level since 2009 as investors fear declining demand for commodities amid a global economic slowdown.

·         Wheat prices continued to push higher overnight on thoughts that Russia might curtail exports to ease inflation pressures as the ruble tumbles. The sharp drop in the ruble overnight significantly raises the possibility that restrictions will occur.

·         Russia’s Ag Minister stated that the government aims to buy nearly 130 million bushels of wheat for state reserves, which could pull supplies from the export market.

·         He then stated that no other intervention in exports is being considered, but left the door open to discuss limiting sales by third party vendors registered offshore. Trade sources report this morning that vessels have stopped loading wheat at Russian ports this morning due to increased red tape from port authorities.

·         Corn and soybean prices slipped lower overnight as the trade looks ahead to a big South American harvest.

·         Southern Brazil should again see timely rains over the next two weeks to avert moisture stress.

Commodity Weather Group Forecast

In the U.S., showers yesterday (.25 to 1.0”) favoring NE, NE KS, much of W. & C. Midwest and Delta. The Plains wheat will see showers limited to the SE 1/4 later this week but is mainly dry the rest of the 10 day. Colder trends continue in the 11 -15 day pushing wheat back into dormancy which will improve winter hardiness. Coldest conditions initially may focus on Midwest wheat but coldest models remain in positive single digits which would not be damaging.

The Midwest is seeing rains slow very late corn harvest in WI/MI but less 10% of crop is left in field now. Rains focus in the Delta later this week should actually benefit drier areas and the damage threat is diminished as rains look much more limited next week. The Southeast is the focus of rains in 11-30 day but wetness damage potential is still limited as drier spells are likely between rain events.

In South America, rains favored E. Goias, N. Minas Gerais, S. Bahia in Brazil yesterday. Rains will shift back to the west the next 3 days as a disturbance move out of N. Argentina. Rains then increase in southern/central areas this weekend into early next week as a strong cold front pushes toward the area. This will improve moisture for drier areas in time to minimize stress on corn/soy.

The drier trend in N. Brazil in the 6-15 day will not be a concern due to recent rains. Support for maintaining dryness in 16-30 day is suspect but needs to be watched.

Argentine showers favored N. Santa Fe yesterday. A strong cold front moves through late this week and could catch N. 1/2 of Buenos Aires slowing wheat harvest. Drying after the weekend continues through next week aiding harvest recovery but more showers possible 11-15 day. Corn/soy crops benefit from the rains with minimal dryness concerns.

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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