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Morning Outlook

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Overnight Highlights

·         Russia takes emergency steps to try to stabilize its currency, buying the ruble while selling foreign currencies. The ruble has lost 52% of its value this year alone.

·         Putin is scheduled to hold his annual news conference tomorrow amid the crisis.

·         The ruble rallied 3% on the emergency measures overnight to 65.6 rubles per dollar.

·         The dollar rallied modestly ahead of today’s midday policy statement from the Federal Reserve monetary policy committee. Wall Street is watching to see if it will remove the words “considerable time” from its statement about maintaining interest rates near zero.

·         Crude oil dropped again overnight, although its low of $54.21 held above Monday’s 5-1/2 year low.

·         Gulf soybean basis is softening as Chinese demand eases from this year’s record highs.

·         Reuters reports that no paperwork has yet been seen to confirm China’s approval of Syngenta MIR 162 train in corn.

·         However, trade sources report that a large order for U.S. DDGS had been received, raising speculation that approval was forthcoming. However, some believe that the Ag Ministry may not sign off on the approval until January or February.

·         Chinese firms have reportedly purchased 900,000 metric tons of DDGS, with the majority of the cargoes reportedly bought by state-owned COFCO, raising optimism of MIR 162’s approval.

·         However, local sources warned that the approval may not result in a significant increase in U.S. corn purchases due to large domestic supplies and the fact that China has not yet approved Duracade.

·         Wheat prices rallied to double-digit gains again overnight on reports that Russia is restricting export shipments to some countries amid its domestic food inflation problems, but nobody has yet been able to confirm which countries have fallen victim to the restrictions.

·         South Korea feed mills tendered to buy 11 million bushels of corn on the global market for April delivery. Trade sources report that they purchased 5 million bushels of optional origin corn thus far.

·         An active rain pattern the next two weeks is expected to again boost moisture levels for southern and central Brazil as the rain pattern shifts south.

·         The winterkill threat increases for the central Plains wheat as the 11- to 15-day outlook shifts colder.

Commodity Weather Group Forecast

In the U.S., showers yesterday (.10 to .50”) favored E. Midwest and Southeast. Plains wheat will see light showers in the E 1/3 next two days but then dry out the rest of the 10 day period. Colder trends continue for next week and are starting to raise the concern level for wheat in the 11-15 day in the C. Plains. Confidence is still low for any damage this far out as some snow could still fall ahead of the system but most current models keep it too light to offer full protection.

The Midwest sees an upturn in showers in the E. 1/3 of the belt in the 6-10 day but come too late to impact tail of corn harvest in WI/MI. Rains in the Delta later this week should benefit drier areas and the damage threat remains minimal next week as rains are generally under an inch. The Southeast is the focus of rains in 6-10 day and 16-30 day but wetness damage potential is still limited as drier spells are likely between rain events. Pacific NW wheat sees more needed showers this week.

In South America, rains favored SE Mato Grosso, NE MGDS and W. RGDS in Brazil yesterday. Rains scatter over drier SW belt the next 2 days benefiting areas of limited soil moisture. A strong cold front begins to cross the S. & C. belt late this weekend into the first half of next week. This has the potential to eliminate moisture deficits for corn/soy. The drier trend in N. Brazil in the 6-15 day is not enough to lead to any dryness issues and week 3 forecasts are turning wetter.

Argentine showers were confined to the far northeast yesterday. Rains this weekend should slow wheat harvest but should benefit drier corn/soy areas in S. Cordoba. Dryness next week aids harvest recovery. Showers early11-15 day slow harvest again but ensure most corn/soy crops remain favorable.

FSU Wheat Snow Potential Likely to Improve in 11-15 Day Despite Warmer Than Normal Pattern. Winterkill threats are minimal next 2 weeks due to the active storm pattern. Temperatures still drop enough by later next week to switch rain events over to snow and potentially protect as much as 2/3 of the crop by late month.

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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