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Morning Outlook

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Overnight Highlights

·         The dollar firmed just below March 2009 highs overnight, while crude oil consolidated higher just above 5-1/2 year lows.

·         Port workers at Argentina’s large Rosario port went on strike yesterday demanding a higher year-end bonus. Strikes are common in Argentina, where inflation is north of 40%. However, the strikes typically don’t last more than a day or two and this is a slower time for agricultural exports.

·         Russia’s Association of Grain Exporters says that it has stopped buying grain on the domestic market for export following government pressure to do so.

·         Ukraine is poised to make up much of the lost Russian business for wheat. There’s no shortage of wheat in the world, but rather it changes who buyers secure it from.

·         Grain trade sources believe that U.S. wheat will garner little of the business.

·         However, the loss of Russian feed wheat on the global market should modestly increase demand on the global market for corn, although there are other sources of feed wheat as well.

·         CME Group halted trade of Chicago soft wheat briefly overnight when prices dropped more than a dime in 10 seconds in volatility created by news on the Russian export restrictions.

·         Brazil sugar cane crush estimated at 642.1 million metric tons, down from 659.1 mmt estimated previously. Sugar output drops to 36.4 mmt, down from 38.3 mmt previously.

·         This should raise Brazilian ethanol imports to meet rising demand there as that country raises the blending rate to 27.5% in gasoline.

·         Soybeans turn lower as rains are forecast to provide relief for dry areas of both Argentina and Brazil in the days ahead.

·         Wheat posts double-digit losses on fears that U.S. supplies are priced too high to garner business shifted away from Russia.

·         Sub-zero readings are pushed back to the 11- to 15-day period in the Plains, impacting primarily areas with snow cover.

·         Corn follows soybeans and wheat lower.

Commodity Weather Group Forecast

In the U.S., showers were minimal yesterday but are increasing in the S. Delta and Pacific NW wheat areas currently. Showers this weekend will favor Delta/Southeast wheat with beneficial moisture. Storms early and late next week favor Midwest/Delta/Southeast wheat with mainly rain. Excessive wetness is not expected to be a problem.

C. Plains wheat has a chance for snow late next week and help to protect the wheat crop as pattern turns colder. However, sub-zero temps are not showing up in any models until the 11-15 day and even then are mainly in snow covered areas, keeping winterkill threats limited for now. Florida citrus areas should see unseasonably cold air penetrate the region in the 11-15 day but freeze threats low.

In South America, rains favored Mato Grosso, N. MGDS, S. Goias, and SW Minas Gerais in Brazil yesterday. Thundershowers will be isolated this weekend but increase along a strong cold front as it crosses S. & C. corn/soy areas the first half of next week. The rains should help to eliminate moisture deficits for most areas. The south half dries out in 6-10 day but rains return in 11-15 day as another cold front increases rain prospects for that period keeping moisture favorable for all crops. The north trend drier in the 11-15 day. The Euro 16-30 day returns rains to normal but the CFS has trended drier. This will need to be monitored but dryness concerns are still limited.

Argentine rains will pick up this weekend and prospects for easing dryness in corn/soy areas of S. Cordoba are favorable. Most models have enhanced rain chances with a second cold front late next week and improve prospects for further easing dryness in corn/soy areas in the west. Wheat harvest in Buenos Aires will see showers slow harvest this weekend but progress improves next week before more delays late next week.

FSU Wheat Warmer Than Normal Pattern Persists Next 2 Weeks; Snow Cover Likely to Slowly Expand. Most models have trended wetter in the next 2 weeks. The moisture is welcome as 60% of belt is chronically short of moisture. Snow cover could cover all but southern quarter of belt by end of month, limiting the winterkill threat area.

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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