Sunday Night Grain Outlook, 7-6-08
Sunday Night Grain Outlook
By Duane Lowry
Sunday, July 6, 2008
OPENING CALL:
Corn= 7-10 lower, Wheat= 6-8 lower, Soybeans= 10 lower.
Weather offers beneficial conditions and forecasts through the next two weeks for most regions. The US winter wheat harvest should proceed with minimal problems. US winter wheat yield reports continue to be very favorable.
News> The EU energy ministers said Saturday that they have been laboring for 18 months under the false impression that an EU plan to fight global warming included an obligation to develop controversial biofuels. Their implication is that the focus needs to be on “renewable” energy and not energy derived from food stocks. According to a UK newspaper, an unpublished World Bank report blamed biofuels for a 75% rise in the price of a basket of staple food items.
Wheat will start lower on the seasonal weight of harvest and continued reports of very favorable US yields. Expected weakness in corn and soybeans will also weigh on sentiment. After 3 days on minor corrective strength, technical conditions are poised for a downside resumption and likely acceleration.
Corn will start lower on non-threatening weather forecasts and growing realization that recent/current weather/soil moisture conditions are very ideal for the vast majority of acres. Anecdotal reports from travelers this holiday weekend clearly focus on surprise at how good crops “look”. Traders also expect Monday afternoon condition ratings from USDA to show improvement. Ethanol continues to get bad press and traders believe we are building momentum to at minimum eliminate the import tariff on ethanol. Legislation towards controlling speculative activity in the commodities industry is expected to return to the spotlight during the next two weeks. Traders are also beginning to dismiss hope that Friday’s USDA monthly S&D report will offer anything capable of producing new upward price strength at this time. More and more traders are beginning to recognize new weather/production concerns will be needed to push prices above current levels. Technical conditions remain extremely vulnerable to sizeable liquidation pressures, which could begin to unravel this week due to the lack of a reasonable weather story at this time.
Soybeans will start lower on non-threatening weather forecasts and ideas technical conditions are vulnerable to liquidation pressures.
In summary, non-threatening weather expectations and ideas technical conditions are vulnerable to selling pressures will be the main driving forces for tonight’s/this week’s weaker price trend expectations. Crude oil and the US $ also appear poised to reverse course, which could add to a liquidation tone across multiple “bullish commodity” positions. Without a weather concern during the month of July, corn prices can easily have at least $1 of downside potential from current values.
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.
