Sunday Night Grain Outlook, 5-18-08

Sunday Night Grain Outlook
By Duane Lowry
Sunday, May 18, 2008

OPENING CALL:
Corn= 2-3 lower,     Wheat= steady-easier,     Soybeans= steady-easier.

Weather offers generally favorable/acceptable conditions and it is difficult to see any reasonable slant that is capable of being labeled “bullish” from a market impact standpoint. Planting is nearing completion in many areas. Temps are seen warming. Soil moisture profiles are favorable in most areas.   

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Wheat found some stabilizing price action last week after reaching long-held downside price objectives, but stabilization doesn’t mean an abrupt shift to a new up trend. New news is limited. Wheat will look to tone of other markets for initial direction. Expect prices to start lower tonight, but trade on both sides is a reasonable possibility.   

Corn will start lower on poor price action Friday that was a significant disappointment to popular expectations. Weather doesn’t offer a bullish story. Charts are unraveling. We seem poised for initial weakness tonight, with the only question being how aggressive the selling activity will be. The trade seems to expect corn planting progress to be 70-75% in Monday afternoon’s weekly crop progress report, with whispers that will likely make the trade fearful of a faster pace. The threat of additional and significant downside vulnerability due to liquidation pressures is real. We have talked about for some time the excessive spec length and the transfer of ownership process that has evolved during the past few months that has left too much market length in the hands of those traditionally vulnerable to a liquidation event. Friday’s close is 48 cents off the highs made just 6 trading sessions ago. Yet it was clear in listening to rhetoric Friday morning that the trade was very much willing to quickly embrace Thursday’s reversal-up action and talk that the break was over. This indicates little willingness to exit longs has yet to occur, meaning if the liquidation break theory is correct, we really haven’t even begun see its influence, despite the fact that we are already nearly 50 cents off the highs. Corn needs to quickly find price stability or a more serious phase of liquidation activity will begin to evolve. If wheat and soybeans manage to show stability/strength tonight, it is possible corn will stabilize and lack the ability to build much downside momentum below last week’s lows. Stabilization early this week could produce a few days of consolidation activity that could reasonably see a retest of Friday’s highs. However, the liquidation scenario remains almost inevitable, but the timing/speed of the decline certainly remains in question.

Soybeans will likely start a bit lower on ideas Friday’s strength may have been a bit overdone and due to initial expectations for corn weakness. However, overall soybean price action has been firm and traders have developed a very bullish longer-term bias to the soybean market due to fears acreage will be less than expected. Traders see any type of weather scare causing this market to react sharply and swiftly. Thus, expect buying interest to surface after any initial weakness. New fundamental news is limited.     

In summary, weather doesn’t seem to have a storyline capable of fueling bullish sentiment. Price action is very weak in corn and the threat of liquidation looms large, but timing of this expected flush is certainly debatable. Wheat and soybeans appear capable of quickly finding buying interest after any initial weakness. Outside markets will be watched for direction as well. As I finish writing today’s commentary, I find that initially I wanted to place overall expectations on the shoulders of corn, which I expected to be very vulnerable to an aggressive increase in selling interest. However, as I near the end of writing, I find myself seriously considering the possibility that stabilization and recovery ability in wheat and soybeans after maybe some initial weakness may possibly be enough to stabilize corn as well. Corn needs to quickly find stability this week…and it could.

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.