Sunday Night Grain Outlook, 4-6-08
Sunday Night Grain Outlook
By Duane Lowry
Sunday, April 6, 2008
OPENING CALL:
Corn= 2-4 lower, Wheat= mixed, Soybeans= steady-easier.
Weather looks similar to Friday’s expectations for the 1-5 day window, production near general coverage across the Midwest. The 6-15 day forecasts offers what appears to be a pattern change and a much improved outlook for drier conditions. The US Plains has a wetter 1-5 day forecast, with coverage seen at 85-90%, improving conditions in the drier southwestern region of the US hrw wheat. Any South American harvest disruptions will be short-lived and generally favorable harvest conditions are seen beyond the short-term forecast. Some may want to focus on short-term Moisture expectations for the Midwest and Delta, but most will be very alert to what appears to be a pattern change towards improving conditions beyond the 1-5 day window. In reality, it is difficult to create a serious planting delay problem and today’s overall forecast offers improving optimism towards the 2008 planting season.
News> Greenspan says it is greater than a 50% chance the US will enter a recession. More and more voices inside Washington and the commodity industry are calling for “some changes” to be made to limit negative impacts of excessive speculation in commodity markets. Variation exists for these calls, but increasing margin requirements seem to be a common theme. India entered into a “call option agreement” on the purchase of 180 tmt wheat with Cargill. India paid a fee for the right to purchase wheat at a specific price, but not the obligation to purchase. Argentine soybean and corn production estimates continue to rise as harvest advances.
Wheat may find mixed calls, with Minneapolis likely to be the firmest. Chicago and KC markets should see weather forecasts as “improved” from Friday’s expectations. Overall it is difficult to justify Friday’s gains and selling interest should increase in wheat this week.
Corn will also likely find mixed calls, with some choosing to focus on still wet 1-5 day forecasts. However, most will be quick to recognize and respond to what appears to be a “pattern change” to a drier forecast and generally more favorable conditions. In reality it is very difficult to create detrimental spring delays. A very large price premium has been built during the past several days on spring delays. Look for increased selling interest this week amid liquidation pressures. Most also believe price relationship changes since March 1st have led to some increase in corn acreage expectations vs the latest USDA projection. However the strong influence of intangible factors such as borrowed capital needs and risk diversity will make it extremely difficult to have a confident acreage assessment until at least after the crops have emerged. We seem poised for weakness tonight and this week.
Soybeans will find mixed calls and mixed expectations. Spring fieldwork opportunities and weather pattern expectations will be seen as improving. While this may tend to seem more bearish corn, this does not automatically mean that it is bullish soybeans. Friday’s strength seems a bit difficult to justify or at least seems somewhat exaggerated with Friday position-squaring before the weekend. We seem poised for weakness tonight and this week.
In summary, weather will be traders’ main fundamental focus and spin will be mixed. However, the indication/suggestion of a pattern change to the overall forecast should spur liquidation selling interest in corn and a general diminished desire for new long positions.
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.
