Sunday Night Grain Outlook, 6-15-08

Sunday Night Grain Outlook
By Duane Lowry
Sunday, June 15, 2008

OPENING CALL:
Corn= mixed,     Wheat= mixed,     Soybeans= mixed.

Weather is similar to Friday’s expectations. Most of the Midwest will be mostly dry during the next two weeks, with any precip systems producing relatively light rain totals. It would appear that the heavy rain pattern has ended.    

News> ADM says they have closed their Cedar Rapids, IA ethanol plant because of local water use constraints due to flooding. Stock company analysts say average US ethanol producers are now losing 10 cents of more per gallon of ethanol distilled, vs a positive profit margin 2 weeks ago. Ethanol stocks have taken a beating and some stocks have been downgraded to “sell” in recent stock circle publications. Saudi Arabia plans to increase crude oil production.

Wheat will look first to row-crop market reactions for its initial price direction. Wheat weather during the next two weeks should be mostly favorable for advancing wheat harvest. Without the influence of dramatic corn strength and fear, wheat would seem quite capable of notable price weakening trends reasserting some energy.    

Corn will find mixed spins. Concerns will remain regarding acreage losses and lost production potential due to excessive moisture stresses of the past few weeks. However, it would seem that the emotion levels should ease and not be able to match last week’s efforts. Traders will expect Monday afternoon’s crop condition reports to be in the 50% Good & Excellent category, down from 60% last week. At some point it would seem reasonable to consider much of the fears have been factored into current values. The ethanol industry continues to suffer from negative margins and it seems quite feasible that old-crop corn demand for the ethanol industry needs to be shaved back by a decent amount. Projections for the next marketing year are also being scaled back. Some traders are talking about sharply higher values again tonight…I don’t see the merit in such predictions, but who knows in the current environment of feed-on-itself fear and market momentum. 

Soybeans will continue to struggle to determine lost acreage that will never be planted, vs much-delayed plantings and likely yield reductions. Here too, what price does it take to factor in current conditions? Argentine farmer/government tensions seem to have increased during the weekend.       

In summary, it appears most are willing to call markets higher tonight, with some expecting sharply higher values. I don’t see the emotion and energy redeveloping this week. Any strength tonight should lack sustainability as the week evolves.  

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.