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Sunday Outlook

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Weekend Developments

·         The computers bought Friday’s USDA crop report in the seconds following its release, reflecting that the data came in better than projections.

·         The human factor then sold that rally, driving corn and soybean prices lower through the remainder of the session, reflecting actual sentiment in the markets that big crops are still getting bigger and that the market has not yet fully priced that into values being traded.

·         Rain delays are expected in the southern and eastern Midwest through Tuesday, but then the weather pattern opens up for harvest over the next two weeks.

·         Storage issues are expected to begin pushing more grain onto the system, pressuring basis, as we move into the last third of October and into early November.

·         Forecast models continue to raise confidence that currently hot and dry areas of the northern half of Brazil’s soybean belt will see good rains, beginning next week in the 6- to 10-day period.

·         More good rains are expected for previously dry areas of the U.S. Plains, helping to establish the 2015 crop.

·         A couple weeks of drier weather beyond the current system moving into the Midwest should benefit soft red winter wheat planting.

Commodity Weather Group Weekend Summary

In the U.S., rains benefit KS/E. OK wheat but slowed harvest in the southern 1/4 of the Midwest and stalled harvest in the northern 2/3 of the Delta since Friday. Frost in the northern 1/4 of the Midwest was too late to cause damage. Rains develop in the Delta and southeast 2/3 of the Midwest Monday/Tuesday, stalling harvest. After that, showers are minimal for the next 2 weeks, allowing harvest recovery.

Rains in Plains winter wheat tonight further improve moisture for early growth, and drier weather then allows late seeding to resume. Southeast harvest will see temporary rain delays at mid-week but limited showers for the rest of the 2-week period. Limited showers in Canada will allow much of spring wheat/canola harvest to finish up in the next 2 weeks.

In South America, thundershowers were limited to Rio Grande do Sul and far northern Mato Grosso in Brazil so far this weekend. Rains in southern Brazil over the next 2 weeks may still cause quality concerns for wheat in RGDS, but activity has been very slow to increase so far. Concerns should be limited to 1/4 or less of the belt.

Dryness in northern Brazil is causing rain deficits to build for coffee/sugar and about 1/2 of corn/soy. However, models still show improved rainfall next week due to a period of enhanced support from the Tropical Pacific. While confidence is still not high, our forecast does continue to trend wetter and would support a period of needed moisture to improve early corn/soy/sugar germination and ease coffee flowering delays. Prior to this rain, a period of heat (90s for coffee and 100s for corn/soy) begins at mid-week and extends into early next week.

Argentine showers return Wednesday to Friday and then again at the middle of next week and late in the 11 to 15 day. Entre Rios and eastern Buenos Aires (eastern 1/4 of wheat) are the areas at most risk for wetness, but the 11 to 15 day event does appear to bring broader coverage that could also slow corn seeding more notably.

Rains Aid E. Australia Wheat Today, S. Australia Still Under Stress Next 10 Days. Rains aid New South Wales (1/4 of belt), but stress persists for S. Australia/Victoria (also 1/4 of the crop).

Rain Potential Improving for Russian Wheat Next 10 Days, Still Limited in Ukraine. Dryness could be reduced to just 10% of the belt if extensive Russian rains meet expectations.

Tropical Cyclone Hudhud to Hit NE India Rice Today, But Damage Limited to <10% of Crop Area.

 

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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