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Morning Outlook



Overnight Highlights

·         It’s report day in Chicago. All that matters to traders over the next few hours is managing risk exposure ahead of the 11 a.m. CST release of USDA’s highly-anticipated crop report. This report has more uncertainty tied to it than any report in many years.

·         The areas that have the greatest risk of market-moving surprises would be in the quarterly corn stocks, as well as the final corn and soybean production estimates, which could hold unexpectedly large revisions to yields and/or acreage.

·         The January crop report has produced 5 daily limit move days in the past eight years in the corn market; two to the upside and three to the downside. It’s only produced one such move in the soybean market during that period and that was to the downside.

·         The current daily limit is 25 cents for corn and 70 cents for soybeans.

·         Lost in all of this is continued index fund portfolio rebalancing for another three days, which is primarily a factor for the beef complex.

·         The dollar initially came under pressure overnight as foreign investors fretted over the drop in wages in Friday’s monthly jobs report, but then the dollar rallied again as the global investment world focused again on the fact that our economy is still the best looking horse in the glue factory.

·         Consensus among the models continues to improve for rains in central and northwestern Brazil next week.

·         Increased snow cover is expected to protect much of the Midwest wheat crop from another round of cold air mid-week.

Commodity Weather Group Forecast

In the U.S. over the weekend, light snow (1 to 3”) fell across the northern 1/2 of Midwest wheat, with rains (.25 to 1.25”) in the southern Midwest/Delta. Lows on Friday night dipped to -5 to -8°F in the northern 1/4 of the Midwest wheat, resulting in spotty winterkill in mainly northern OH. The northeast Midwest will see subzero readings tomorrow night, but current snow cover should minimize damage.

Delta wheat will dry back out today, and a week of dry weather help to keep wetness concerns minimal. The northern 1/2 of Plains wheat has a chance for some needed showers in the 6 to 10 day and the southern 1/3 in the 11 to 15 day, which would benefit limited soil moisture reserves. Winterkill risks in the C. Plains increase with the colder pattern in the 11 to 30 day, but models are only generating subzero readings thus far in areas with snow cover.

In South America, weekend rains favored parts of central Sao Paulo, central/far southern Parana, northern Mato Grosso do Sul, central/northeast Mato Grosso, and Rio Grande do Sul in Brazil. Rains favor the south through the weekend but occasionally scatter into Parana/Sao Paulo/Mato Grosso. Rains then expand in the central/northwest late in the 6 to 10 and early in the 11 to 15 day, with model agreement improving. This should only miss 15% of corn/soy/sugar and reaches at least ½ of coffee. While the CFS trended wetter, warm/drier pattern may still return next month for coffee/sugar after late January showers.

Argentina received locally heavy rain in northern/central Cordoba, central Santa Fe, and northern/western Entre Rios over the weekend, with a similar system the next 2 days. However, the balance of the 15-day gradually turns quieter to limit flooding concerns, and most drier   southwest areas in the next 10 days picked up good rains last week.

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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