Sunday Night Grain Outlook, 11-18-07
By Duane Lowry
Sunday, November 18, 2007
OPENING CALL:
Corn= steady-easier, Wheat= steady-easier, Soybeans= steady-easier
Weather is similar to Friday and will be seen as bearish. South American weather and forecasts remain favorable. US Plains desire more precip, but some moisture is slated for the 6-10 day period.
News> China continues to take policy steps to curb economic activity and address what is seen by many as an speculative investment bubble in their stock market, which as has nearly doubled during the past 12 months. China’s bank regulators have ordered commercial banks to freeze lending through the end of the year so that outstanding loans at the end of the year are no higher than outstanding loans as of October 31st. While key OPEC players have opinions about the depreciating US $, the official OPEC communiqué appeared to be on track to follow the strong Saudi stance to keep official discussions and statements about the weak US $ out of the OPEC meeting headlines. However, late minute pressure from Iran and Venezuela managed to get ministerial support for a committee to study the possible effects of a currency basket for crude oil.
Wheat will start lower on Friday’s weak price action that caught recent “bottom-picking” market sentiment by surprise. In fact, Friday was the lowest Friday settlement for new-crop July futures since September 21st. After several weeks of sideways activity in new-crop futures, we remain poised for a downside breakout. Technical-based selling pressures may increase this week. Dryness remains a concern for parts of the US Plains, but rain expectations have improved for the 6-10 day forecast.
Corn may see trade on both sides, as Friday’s strength provides some hope for the bulls. However, with wheat trade sentiment a bit shaky and some signs of improving producer selling interest, short-term rally potential may be limited. Corn has been the one market where bears appear to have some confidence and just a respectable level of fear, leading to increasing willingness to sell rallies. There is also legitimate concern that sizeable spec liquidation pressures could still unfold before the end of the month. Monday March futures become “top step”. This transitional period often times tends to spur liquidation activity.
Soybeans will see trade on both sides tonight. Friday’s late soy weakness and continued favorable South American weather are reasons to expect some selling pressures. Yet, weekend news developments will still tend to foster “weak dollar” and “firm crude” discussions. During the past several days, we have seen multiple price action signals suggest the grain trade is attempting to divorce itself of a day-to-day influence from the outside markets. Any early strength tonight/this week due to firmer crude oil values may lack sustainability. We may have reached a point in price where we are high enough to attract maximum acreage draw to soybeans in 2008 through soybean price strength. The next method to increase soybeans may in fact come from a weakening corn price trend. It would seem reasonable to believe that further soy price gains will need to come from South American production concerns. At the present time, the next 2 weeks appear quite favorable.
In summary, we can easily see trade on both sides tonight and early this week. However, we should find it difficult to build upon or even maintain recent strength in the soy-complex. All markets could find increasing trader willingness to sell strength during the next few days, limiting rally potential. We are due for liquidation pressures in corn and soybeans, with soybean price patterns extremely extended and vulnerable to a notable correction phase.
This newsletter is prepared from information believed to be reliable. Early Market News, Inc. does not guarantee that such information is accurate or complete and it should not be relied upon as such. Opinions expressed are subject to change without notice.
