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Sunday Outlook

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Weekend Developments

·         A Bloomberg Global Poll of international investors revealed perceptions that the world economy is at its weakest condition of the past two years, with a bias that it is still deteriorating.

·         China’s bad loans jumped the most since 2005 in the third quarter, raising concerns about its ability to sustain growth. Its economic expansion is the weakest since 1990.

·         The U.S. economy, as weak as it is, looks to be the strongest of the world’s major economies, which is expected to keep global investors looking to the dollar in anticipation of higher interest rates here next  year.

·         Farmers continue to hold onto corn, but are starting to let go of soybeans. As such, corn basis remains steady to firm, while soybean basis shows signs of weakening again.

·         Friday’s CFTC report showed hedge fund managers are building net long (bought) positions in corn and soybeans, largely because they have been unwinding short (sold) positions rather than showing the conviction of building long ones.

·         Action in the soybean complex to start the week will likely prove pivotal for the rest of the week. It showed signs of tipping over last week, but didn’t confirm the move. It will be difficult for corn to continue higher if soybeans break.

·         South American weather looks quite favorable through the remainder of November.

·         The longer-term corn and soybean fundamentals would appear to be more bearish this week than last, but I won’t be confident in that direction until I see soymeal basis break, and that hasn’t happened yet.

Commodity Weather Group Weekend Summary

In the U.S., snow (mainly 1 to 4”) fell in the northwest 1/2 of the Midwest and C. Plains this weekend. A band of snow (mainly 2 to 4”) runs from the S. Plains to the southeast 1/4 of the Midwest today/tomorrow, while significant rains concentrate in the Delta. Snow in TX cotton/Midwest corn should not be heavy enough for damage, and soy harvest delays in the Delta will be mainly confined to KY/TN.

Additional rain in the Delta is likely Friday, but the main storm will be early next week. Mainly rain occurs for the Midwest and Delta, but some snow is possible in the northeast Midwest. The main concern would be localized excess moisture in the Delta. Colder trends in the 11 to 15 day threaten germination problems for 10% of the Midwest wheat.

In South America, weekend showers favored central/northwest Mato Grosso, central/far northwest Goias, northern Minas Gerais, and central/southeast Bahia. Rains remain focused on far northern Brazil in the near-term but appear likely to expand in the 6 to 10 day. This will aid soil moisture and limit crop concerns, although the 16 to 30 day guidance remains quite wet in central Brazil and may have to be watched for potential pockets of too much moisture from Mato Grosso do Sul into southern Minas Gerais/Sao Paulo.

Argentine rains scatter across mainly southwest/northern areas late Tuesday into Thursday, with additional rain in the south to finish the week. Rains also favor the south in the 6 to 10 day and south/east in the 11 to 15 day, although forecast confidence is relatively low. While some near-term improvement is occurring, pockets of excess moisture will likely linger and still cause issues with spring seeding and for maturing wheat in parts of Buenos Aires/Entre Rios/Santa Fe. The 16 to 30 day guidance has also leaned wetter over the weekend for the region.

China Wheat Rain Chances Improve in 6-10 Day, Could Still Benefit South Half of Belt. Recent dryness has limited fall growth across the belt. Despite good model consensus, confidence remains only moderate, as the area is in the dry season. Temperatures remain warm enough for the crop to benefit.

Colder Trends in Russian Wheat, But No Winterkill Threat Apparent in Next Two Weeks. A poorly established crop with minimal protective snow cover leaves half the crop at risk if cold intensifies.

 

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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