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Sunday Outlook

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Weekend Developments

·         Asian stocks are dropping this evening, with crude oil adding to Friday’s sharp losses, trading near $64 per barrel on global economic concerns.

·         However, the dollar is trading near Friday’s 4-1/2 year high as global investors look for a safe-haven.

·         Wheat prices surged Friday on reports that Russia was making moves that would curtail exports, but local analysts suggest that the market is over-reacting, with exports likely not impacted much.

·         Soybeans are vulnerable to follow-through liquidation, particularly after Friday’s USDA weekly export sales report showed big soymeal cancellations and amid favorable South American weather.

·         Corn basis remains strong amid slow farmer selling, but bearish longer-term fundamentals are limiting buying interest at current price levels.

·         Weekend rains were less than expected in Brazil, limiting wetness concerns, but widespread rains are expected to support high yield potential over the next two weeks.

·         Rains in the 6- to 10-day period are expected to benefit Southern Plains wheat.

·         Holiday trade tends to thin from Thanksgiving through the Christmas break, leading to erratic trade at times, but with a bias toward weakness ahead of Christmas as along as weather threats remain limited.

Commodity Weather Group Weekend Summary

In the U.S., the weekend has been mainly dry, with snow flurries in MI. Light rains will fall in the southeast Midwest/northern Delta Monday, with more significant rains Thursday/Friday. Additional rains early the following week should fall across the S. Plains, southern Midwest, and northern Delta. With much of harvest complete in the Midwest/Delta, impacts will be minor.

The main concern would be TX cotton, with about 1/4 of crop still in fields when rains arrive. Moisture will still aid slow growth for OK/TX wheat. A milder 6 to 15 day could allow limited improvement in wheat germination in the southern Midwest. Southeast cotton/soy harvest improves, with dry weather in the next 10 days. Pacific Northwest wheat is dormant, but rains will enhance soil moisture.

In South America, weekend storms were near expectations but favored much of central Cordoba, central/southern Santa Fe, Entre Rios, northern/central Buenos Aires, and eastern La Pampa in Argentina (mostly 1 to 2”). The forecast has turned a bit drier in southwest Argentina with the next rain chances (next weekend/early next week), but another .50 to 2” is possible for much of the belt.

While breaks are occurring much of this week and again mid to late next week, the wetter weather will be slowing late corn/soy seeding again (much of remaining acreage in Cordoba/Buenos Aires) and causing quality/yield threats to build again for wheat (especially in Buenos Aires). Guidance remains mixed for the balance of December, but our forecast still leans to the wetter side in Argentina.

Scattered storms in Brazil favored central Minas Gerais, Espirito Santo, southern Goias, northwest Mato Grosso do Sul, and southern Mato Grosso but were less than expected. While widespread coverage should aid soil moisture in the next 2 weeks, the model wet bias keeps chances for excess totals localized.

FSU Wheat Picked Up Light Snow This Weekend, Winterkill Threats Very Low. Snowfall of 1 to 4” in southern Russia/eastern Ukraine will protect the crop from late-week cold. A lack of snow elsewhere leaves 1/2 of wheat vulnerable to winterkill, but threats are minimal in the next 2  weeks.

Australia Rains Stall Wheat Harvest in East This Week. Nearly 1/3 of the national crop area will see rains slow harvest and lower quality, but losses remain isolated.

 

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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