Sunday Night Grain Outlook, 7-27-08

Sunday Night Grain Outlook
By Duane Lowry
Sunday, July 27, 2008

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

Weather conditions and forecasts remain favorable, with exception to parts of the Delta. However, the favorable weather spin is becoming quite old and known. With improved price action Friday I wouldn’t be surprised to see the trade want to discard focus on favorable weather and be quick to say it is already discounted. They will also be quick to focus on any carrot on a stick that may possibly exist in some deferred part of the forecast.      

News> Proposals were circulating a WTO meeting this weekend that would impose a quota on Brazilian ethanol entering the European Union. An Iranian newspaper this weekend says Iran will need to import 1 mmt of wheat per month until March. The article was not clear, but the implication is that they need about 7 mmt from here forward, with reports on Friday that they purchased 3 mmt, leaving another 4 mmt to secure.

Wheat will find encouragement from Friday’s price action and ongoing comments about further Iranian demand after purchasing 3 mmt Friday. Some will say Friday’s strength was a bit exaggerated and will expect slightly weaker values tonight. However, any weakness tonight will unearth some speculative buying interest. Friday’s wheat action may also have been the culmination event for the flushing of bullish corn positions that were in the form of long corn/short wheat, which has been a brutal beating for those bullish corn positions. Consequently, we may see wheat begin to underperform against corn from current levels. Technical conditions seem capable of producing more wheat strength during the next 1-2 weeks. New wheat selling interest will begin to build in the July 09 contract (new-crop) on probes above Friday’s highs during the next couple of weeks.     

Corn will find mixed calls. The tendency has been to come in on Sunday night and be lower due to a lack of a bullish weather story. Some will expect the same tonight. However, favorable weather is certainly becoming an old comment and should be largely discounted by the trade. The big problem for the corn market has been liquidation pressures. Friday’s price action offers some hope/confirmation that this pressure is over—at least for the time being. Anecdotal field reports can be found to support any bias, but it would appear that it may be time to give the naysayers a bit louder voice. Again, Friday’s price action will go a long way to shaping the tone of market spin and focus. Technical conditions are poised for more corrective price strength during the next two weeks. Any early week weakness, if it occurs, will find new and more invigorated buying interest, amid a backdrop of much less liquidation pressure.  

Soybeans will also find technical-based buying interest on any early week weakness, if it occurs. Trader focus will also shift to preparations for the USDA August crop report, which will tend to make shorts more nervous than any remaining longs that have already suffered through what they believe to be the worst of the price pressures before the report. Expect some firming trend to unfold this week and possibly into the August crop report.             

In summary, weather remains generally favorable, but arguably already discounted. Liquidation pressures should be limited. Technical buying interest will be improving. Consequently, any early week weakness potential should be limited.       

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.
© 2008 Duane Lowry. All Rights Reserved.