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Morning Outlook

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Overnight Highlights

·         It’s the day after Christmas and all is still quiet in the markets. Trade volume is expected to be very thin in today’s trade, which could again amplify price moves if the remaining traders who are present line up on the same side.

·         Grain and oilseed markets remain closed thus far this morning; opening at 8:30 a.m. CST with a normal closing time today. Early calls are mixed for this morning’s open.

·         USDA delayed release of its weekly export sales report until Monday due to the Christmas break.

·         The dollar is stronger this morning and trading just below 8-1/2 highs. Crude oil is modestly higher after Saudi Arabia assumes average price of $80 per barrel in 2015 and amid increasing conflict with militants in Libya.

·         Bloomberg reports that Russia’s wheat export duty will be 15% of a shipment’s value plus 7.50 euros per metric tons for a minimum of 35 euros. That would currently equal $1.16 per bushel, is less than previously believed and would allow some exports to continue.

·         The above export duty is expected to be implemented on February 1. It’s not clear what will happen with exports between now and then.

·         Wednesday’s losses in the corn and soybean markets were contra-seasonal for the last trading day before Christmas, sending a warning signal to market bulls, albeit at low trade volumes. However, that sets a bearish tone for today’s trade, which also has tended to be an up-day for corn and soybeans.

·         Spot corn futures settled higher the first trading day after Christmas in 9 of the past 12 years, while soybeans did so in 8 of the past 12 years, but Wednesday’s price action moved lower against even stronger seasonal rally tendencies.

·         Rains are expected to aid much of Argentina’s corn and soybean crops over the next 5 days, providing relief for some areas that were drying out.

·         Heavy rains are expected across southern Brazil over the next week, but then the wetter pattern shifts to the north, limiting risks for crops and keeping yield potential high.

·         Some winterkill damage is likely for Plains winter wheat on New Year’s Eve.

Commodity Weather Group Forecast

In the U.S., rains favored the Southeast (.25 to 1.25”, locally 2.5”) and eastern Midwest (.25 to 1”) in the past 2 days, with significant snow limited to MI. Rains return this weekend to the Delta/Southeast wheat. Additional showers favor the Delta/Southeast/eastern Midwest late next week. The Midwest and Delta wheat can still soak up rains. Only GA is at risk of standing water issues but should be on the edge of upcoming showers.

Good model agreement exists for the strong cold push next week in the Plains hard red winter wheat. Snowfall helps provide some protection today, but mainly 1 to 3” totals will not be enough to avert damage in NE, CO, and western KS. The Midwest should not see the brunt 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 began to see showers scatter into La Pampa, far southern Cordoba, and western Buenos Aires overnight, with activity heading eastward into the weekend and again by late Tuesday/Wednesday. The most limited rains are expected in the far southeast and possibly parts of northern Cordoba/west-central Santa Fe. While late wheat harvest will be slowed at times in Buenos Aires, this should narrow the driest areas in the northwest to about 10% of corn/soy, with another rain chance for much of the belt showing up in the 11 to 15 day. 90s expand through Monday but then quickly ease.

Brazil showers favored western Mato Grosso, northeast Mato Grosso do Sul, and central/far western Sao Paulo in the past 2 days. Locally heavy rains (6 to 8”) in the south next week should ease next weekend to limit wetness concerns, with 11 to 15 day showers returning to all but far northeast crop areas to maintain stable conditions.

FSU/Europe Wheat Turning Colder Next 2 Weeks, But Snow Builds and Protects Crop. Winterkill threats remain very low for Europe and FSU wheat areas despite a notably colder than normal pattern, as the air mass is not strong enough to produce damaging temperatures in any areas except those with significant snow cover.

Morning Market Snapshot

The markets will open at 8:30 a.m. CST.

 

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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