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Morning Outlook

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Overnight Highlights

·         Merry Christmas from the Water Street family!

·         The markets will trade a shortened day today, closing at Noon CST. Trade volume should be thin for the session. Trading hours are normal on Friday after opening at 8:30 a.m., but trade volume should again be thin,

·         It’s impossible to say how today’s thin trade will leave prices, but it’s interesting to note that the lead corn and soybean futures contract settled higher the last trading day before Christmas in 11 of the past 12 years.

·         Russia is scurrying to keep things calm this morning after Standard and Poor’s said that it is considering lowering it to junk status within 90 days.

·         Egypt’s state grain buyer states that trading companies are obliged to abide by their contracts to deliver Russian wheat to Egypt in January. It’s yet to be determined whether that will actually occur.

·         Palm oil prices rose to their highest level in a month overnight as monsoon rains pound Malaysia, hurting production.

·         Both the dollar and crude oil were lower overnight.

·         Grain and oilseed prices were steady to lower overnight as well.

·         Locally heavy rains are expected in far southern Brazil over the next 10 days, but showers then shift north to central and northwestern areas.

·         The models are split on Argentine rains over the next 10 days, but Commodity Weather Group prefers the wetter Euro model.

·         Model consensus grows for a winterkill event in the central Plains New Year’s Eve.

Commodity Weather Group Forecast

In the U.S., rains (.50 to 1.5”, locally 3.5”) favored the southeast Delta and Southeast yesterday. Rains linger in the Southeast today, with drying then until late weekend when a new shower system crosses the Delta/Southeast wheat. Most areas have the ability to soak up these rains, and standing water problems are not expected. However, additional rains in the 11 to 30 day will keep a small risk of wetness in place.

The models trended colder for next week in the C. Plains. Snow appears limited to 1 to 2” in most of the area, and the potential for damage from sub-zero readings in NE, CO, and N. KS has increased. The event is still far enough out that confidence remains low to moderate. The Midwest escapes the strongest of the cold push and should avoid damage. Temperatures moderate in the 11 to 15 day, easing further damage risks to wheat.

In South America, Argentina remained dry again yesterday, with weekend showers still expected to favor far northern areas as well as northern/eastern Santa Fe, Entre Rios, and northeast Buenos Aires. Another event at the middle of next week should favor many of the same spots but will also throw rains into central/southwest areas.

Confidence is a bit lower today given drier GFS guidance. Driest areas are currently in central/southwest Cordoba, far western Buenos Aires, and La Pampa (15 to 20% corn/soy) but could be narrowed to 10% of the belt next week.  Interruptions to late wheat harvest will occur but are a bit more limited.

Brazil showers scattered from Mato Grosso eastward through northern Sao Paulo and central Minas Gerais yesterday. Locally heavy rain will be possible in the next 10 days in far southern areas but then slides north, and only far northeast areas may still miss 11 to 15 day showers. Crop concerns should remain minor.

FSU/Europe Wheat Trend Notably Colder, But Most Areas See Snow Ahead of Strongest Cold. The Euro model is most aggressive, with readings below 0°F across much of Ukraine, northern Russia, and eastern Europe late in the 6 to 10 day. However, snow cover ahead of the cold push could protect much of the wheat.

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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