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Sunday Outlook

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Weekend Developments

·         Traders brace for a holiday-shortened week that will likely see low volume and possible erratic price swings.

·         Seasonally, there is a bias for spot corn and soybean futures to firm through the holiday period, but that seasonality meant little on the day before Christmas when low-volume trade saw big losses as remaining traders lined up on the same side.

·         Corn ethanol and soybean crush and export demand continues at a record pace, with some traders building in expectations for a bullish corn report on January 12.

·         Farmer sales have increased modestly on rallies, but still generally remain below the pace of demand.

·         Yet, gains have been increasingly difficult to sustain as we draw nearer to what appears to be a big South American harvest.

·         Southern Brazil will be the wettest over the next two weeks, but a break in the 6- to 10-day period should limit wetness risks.

·         Showers early this week and again early in the 11- to 15-day period should limit dryness concerns in Argentina.

·         Winterkill threat focuses on the northwestern quarter of the Plains winter wheat belt Tuesday night.

·         Russia appears ready to start restricting exports with duties February 1 amounting to $1.16 per bushels, but U.S. wheat is too high priced to capture any business lost by Russia.

·         USDA’s January 12 crop report is known for its surprises creating daily limit moves. The direction of prices reactions on the day of the reports have been fairly evenly split.

Commodity Weather Group Weekend Summary

In the U.S., widespread rains covered the Delta (.35 to 1.35”, locally 3.5”) and southeast 1/3 of the Midwest wheat (.10 to .50”) in the past 2 days. The rains this week continue to focus on those areas. Thus far, only far southern MS and central AL are at risk of wetness damage. The heavier rains this week focus to the northwest of that area, limiting damage to less than 10% of the soft wheat belt. Overall, the rain pattern is still active in the 6 to 15 day, but there are no immediate damage threats given low soil moisture levels.

Snow in the Plains/Midwest wheat remains light and limited in the next 2 weeks. The first surge of cold air arrives in the C. Plains Tuesday night, with winterkill risks focused on CO, NE, and northern/western KS. Snow cover in most of the area will range from 1 to 4” to provide some protection, but nearly 1/3 of the wheat will be at risk for patchy winterkill. Another strong cold push is possible late in the 6 to 10 day for the western Midwest and C. Plains wheat.

In South America, weekend showers have scattered across mainly central/northeast Argentina and southern Brazil. Heaviest totals (locally up to 4”) were from northern Entre Rios into western RGDS and western Santa Catarina. Rains remain very active this week in southern Brazil and again in the 11 to 15 day, but a break of nearly a week starting on Friday should limit excess moisture concerns in RGDS. Only the northeast 15% of corn/soy and 1/4 of coffee in Brazil appears likely to miss most of the rains in the next 2 weeks, and yield potential should be stable overall.

Scattered Argentine showers reach about 2/3 of corn/soy through mid-week, with fairly widespread rain also early in the 11 to 15 day. Any lingering dry patches in the west should remain limited to 10 or 15% of the belt. 90s do expand by Monday/Tuesday and briefly again late in the 6 to 10 day but are short-lived, with heat otherwise remaining limited to fringes of the belt (mainly La Pampa) in the next 2 weeks.

FSU/Europe Picking Up Snow This Week, Protecting Wheat From Cold Air; Milder Next Week. Substantial snow is likely in southeast Europe, Ukraine, and N. Russia early this week. Sub-zero F readings later this week focus on snow-protected areas, limiting damage risks to northern fringes of South Russia.

 

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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