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Morning Outlook

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Overnight Highlights

·         The dollar pushes to its highest level since April 2006 overnight amid broad economic concerns overseas.

·         Crude oil consolidates modestly higher, just above 5-1/2 year lows.

·         Monday’s USDA cold storage report revealed that beef supplies are slowly rebuilding in the freezer; up 5% from the previous month, but still down 12% from the previous year.

·         Ham supplies in the freezer were down 40% from the previous month on Christmas buying and down 17% from the previous year, but supplies of virtually all other pork cuts are growing in size as the hog herd expands.

·         Gulf hard red winter wheat basis dropped a nickel, while soft red winter held steady amid slow export demand.

·         Corn and soybean basis was mostly steady, both at the Gulf and in the interior.

·         Trade volume is expected to slow in the days ahead as traders take off for the Christmas and New Year’s break, leading to erratic movement at times.

·         Corn futures are steady to firm this morning after trading less than a 2-cent range overnight.

·         Ethanol continues to trade more than a nickel above gas prices, raising concerns about demand longer-term.

·         Soybeans are modestly lower on an increased focus on the big South American crop after trading less than a nickel range overnight.

·         Wheat bounced modestly overnight after big losses in recent days, but remains 75 to 80 cents above alternative supplies from Europe and the Black Sea regions.

·         Winterkill risks have increased in the central Plains and southwestern Midwest winter wheat belt for next week.

·         Showers are expected to focus on central and northwestern Brazil corn and soybean growing areas the next few days, shifting further south next week.

·         Rains this weekend and again next Tuesday are expected to aid Argentine corn and soybeans.

·         USDA will release its quarterly hogs and pigs report at 2 p.m. CST today. It is expected to confirm expansion of the nation’s hog herd.

Commodity Weather Group Forecast

In the U.S., showers (.25 to 1”) favored the western/central Midwest and the Southeast yesterday. Showers favor the eastern Midwest/Delta/Southeast wheat the next 2 days and potentially the Delta/Southeast again on the weekend. The South is favored for rains in the 11 to 30 day as well, but wetness concerns are minimal given below normal soil moisture covering the area.

A stronger cold push at the middle of next week raises the potential for sub-zero readings in NE, CO, KS, and MO, but confidence remains low given the waffling by models on this event. Snow potential is limited over the next two weeks, with the best chance for 1 to 4” in the northwest corner of Plains wheat and the southeast Midwest leaving most wheat areas exposed if a stronger cold push were to verify.

In South America, Argentina was dry yesterday, with the next chance for showers this weekend. Coverage was increased in eastern areas with this event, and a second system still crosses mainly on Tuesday (favoring central/southeast areas). Driest areas are limited to central/southwest Cordoba, far western Buenos Aires, and La Pampa (15 to 20% corn/soy) but should be narrowed a bit further in the 6 to 10 day. Only a brief warming into mostly the low to mid 90s is expected this weekend and again in the 11 to 15 day for mainly the west.

Brazil showers scattered across central/northwest areas, including much of the Mato Grossos, southern Goias, southern Minas Gerais, Sao Paulo, and northern/eastern Parana. Similar activity occurs in the next few days, with rains then favoring the south into next week. The northeast 10 to 15% of corn/soy and northern 1/4 of coffee may be short-changed in the next 2 weeks, but these areas have seen some recent showers.

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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