Sunday night grain outlook, 12-9-07
Sunday Night Grain Outlook
By Duane Lowry
Sunday, December 9, 2007
OPENING CALL:
Corn= steady-easier, Wheat= steady-easier, Soybeans= steady-easier
Weather continues to offer widespread precip across the US hrw wheat areas, with precip totals in today’s forecast greater than Friday’s outlook. Near general coverage is expected across the Plains hrw wheat areas during the next 5 days. Argentina weekend activity was mostly light as expected. Some rains will reach Argentina during the 1-5 day window, producing 45% coverage. Some of the drier areas will receive moisture during the next two days. A more normal precip pattern is expected in the 6-10 day window. Brazil will receive 80% coverage during the next 5 days. Only 10% of Brazil’s growing region will experience less than desired rains during the next 10 days. It is difficult to put a bullish spin on weather.
News> China says that while they are seeking to limit biofuel production from food crops they are unveiling plans to provide financial incentives to biofuel projects that produce energy from non-food crops and products. China says they will work through financial incentives and regulations to shift current biofuel production away from using food products and towards non-food based sources.
Wheat will find mixed expectations; with some saying Friday’s limit advances will fuel additional buying tonight. However, prices traded off limits multiple times and the synthetic values suggested only slightly firmer values at the close Friday. Some will say this week’s expectations for widespread rains in the Plains and possibly greater amounts than expected Friday could weigh on initial sentiment. Countering that point will be the idea that the widespread rain event for early this week was fully expected in Friday’s forecast. I certainly wouldn’t rule out trading higher tonight, but it seems that Friday’s gains could be seen as overdone and we should experience some weakness tonight.
Corn was the laggard most of the day Friday, finishing with a flurry of buying late that could have easily been associated with locked limit wheat, a late surge in soybeans and “get me out” short-covering before the weekend. Argentina’s forecast doesn’t appear that threatening, but it doesn’t have a clear “soaker” either. The C-O-T report showed the market longer than expected. It won’t surprise me to see some weakness here tonight.
Soybeans shouldn’t find bullish spin from South American weather forecasts, but the weather wasn’t bearish Friday either but we rallied anyway.
In summary, Friday’s price action was certainly inflated with fear of the possibilities that could develop over a weekend. South American weather doesn’t appear as threatening as the “what if” fear-based sentiment would have seen on a Friday. The US wheat weather appears quite favorable. Overall, it appears that Sunday night’s sentiment will be absent of the uncertainty found on a Friday, which should help to produce some weakness during tonight’s trade. That said, we have seen many Sunday evenings during the past several months that have ignored initial logical expectations only to be run over by enthusiastic speculative buying activity.
