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Morning Outlook

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Overnight Highlights

·         It’s a holiday-shortened week for the markets with many traders taking an extended break leading to thinner trader volume. The grain and oilseed markets will close at Noon CST Wednesday, reopening after Christmas at 8:30 a.m. for a normal trading day on Friday.

·         The dollar rallied to its highest level since April 2006 late Friday before pulling back modestly. It firmed again to just below Friday’s high overnight, but is showing small losses currently. The euro posted two-year lows against the dollar as the two currencies show very divergent fundamentals.

·         Two Chinese ministers have offered help to Russia in shoring up the ruble, according to a Bloomberg report, reflecting the rapidly changing dynamics of world politics that we live in today.

·         Reuters reports that China has approved the import of Bayer CropScience BAYE.NS soybean variety after seven years of review. Bayer also received acceptance of its LL55 Liberty Link variety for import into China.

·         Friday’s CFTC report showed speculative hedge funds switching back to a net short (sold) position in soybeans, while maintaining a modest net long (bought) position in corn.

·         Egypt, the world’s largest wheat importer, bought 8.8 million bushels of French and 2.2 million bushels of Russian wheat over the weekend for late January delivery, reminding traders that U.S. wheat remains too high on the global marketplace and that Russia was still selling at least some wheat to one of its best customers. U.S. wheat was more than 75 cents per bushel too high.

·         Wheat prices lost more ground in follow-through selling overnight until reports emerged that Russia plans to implement a grain export duty, which re-energized the wheat market.

·         Corn and soybean futures are soft this morning on growing focus on big South American yields, offsetting the fall’s demand focus.

·         Dry areas of Cordoba in Argentina saw 0.50 to 2.0” rains over the weekend, with more expected early next week.

·         Brazil rains continue to shift around over the next two weeks, ensuring that no place gets too wet or too dry and continuing conditions favorable for high corn and soybean yields.

·         The models aren’t as cold for Midwest/Plains wheat this morning, further limiting winterkill risks over the next two weeks.

Commodity Weather Group Forecast

In the U.S., showers (.25 to 1”, locally 2.5”) were confined to the southern Delta/Southeast and Pacific Northwest over the weekend. Showers early this week favor the Midwest/Delta/Southeast wheat with mainly rain. C. Plains wheat has a chance for snow later this week but will be limited mainly to the foothills of the Rockies. Colder conditions will settle into the Plains/Midwest wheat in the next 2 weeks, but sub-zero temperatures are minimal in the latest models to keep winterkill threats minimal.

Rains in the 6 to 15 day in the Delta/Southeast will need to be monitored but for now do not appear to be enough to lead to any significant standing water. Pacific NW wheat is in better shape after weekend rains, with more this week.

In South America, weekend rains aided Argentine corn/soy, favoring southeast Cordoba, northern/southwest Santa Fe, Entre Rios, and northwest Buenos Aires. A few showers reach northern/far western areas Thursday/Friday and again in the 11 to 15 day, but the main rain chance is early next week. This should help to limit dry spots, although late wheat harvest will be slowed in Buenos Aires. The GFS shows weekend heat (mid 90s to low 100s) but likely is again much too hot given the lack of ensemble support, with low to mid 90s more likely.

Brazil rains favored parts of northern Mato Grosso do Sul, eastern Mato Grosso, Goias, western Minas Gerais, central/northeast Sao Paulo, central/southeast Parana, Santa Catarina, and Rio Grande do Sul over the weekend. Rains will favor central/northwest areas much of this week but then the south into the 6 to 10 day and shift back north in the 11 to 15 day. Driest spots will be in eastern Goias, northern Minas Gerais, and Bahia, but the shifting rains elsewhere will help to keep any dryness concerns very limited in scope overall.

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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