Sunday Night Grain Outlook, 8-3-08

Sunday Night Grain Outlook
By Duane Lowry
Sunday, August 3, 2008

OPENING CALL:
Corn= mixed, leaning better,     Wheat= steady-better,     Soybeans= mixed, leaning better.

Weather offers a “trending drier” pattern for the US Midwest during the next 2 weeks. Some extreme heat remains for another couple days, but then we see more normal-below temps for the balance of the two-week outlook. Some precip will occur during the next couple days, but from Wednesday forward the precip pattern will be much drier. The Delta will see some rains during the 1-5 day window, with some normal-above precip during the 6-15 day window. Most areas of the Midwest will experience little if any crop stress during the next two weeks, but from a market perspective, some will see the lack of precip expectations as being supportive.  

News> International tensions with Iran are on the rise, as Tehran gave a defiant response to a west-imposed deadline for actions on the nuclear program. The US is calling for more UN sanctions.

Wheat performed well last for no real reason, and especially well if you consider its performance was in the face of weak corn and soybean trends. We are at the time of year where there is a tendency to look for a bottom and some seasonal strength pattern to unfold. Global demand activity seems a bit improved lately, but the overall global supply outlook remains decisively bearish. Short-term technical indicators offer little reason to expect aggressive selling interest tonight or this week in general. IF corn and soybeans can at minimum stabilize early this week, wheat still appears likely to have more upside potential above last week’s highs. As mentioned last week, the wheat market seems poised to unfold notable but difficult to explain price strength and in the process seek to build confidence that seasonal lows have been established. Any weakness potential tonight should be limited.    

Corn will find mixed expectations. Friday’s very weak performance and poor close will certainly find the trade leaning to the downside. The trader sentiment has also morphed into a more bearish-leaning sentiment, resigning to the idea that national production fears were previously grossly exaggerated and the lack of a general weather concern in any region outside of parts of the Delta may mean better production potential than earlier imagined possibilities. Traders are also bracing for bearish production estimates from FCStone Monday afternoon. Last week the trade’s weather focus was all about heat. Today’s forecast has little heat concerns through the next two weeks. In fact, if anything the relatively cool temperature expectations may cause some to refocus concerns on later than normal crop development. Today’s forecast also has a much drier trending feel than any forecast we have seen in 2008. Consequently, it won’t be a surprise to see some express concerns about a new pattern of drier conditions as we enter the month of August. Maybe the market will be lower tonight, but I don’t think there will be any great enthusiasm to press the short side at this time. I think this week’s lows will be made early in the week.  

Soybeans will also find traders entering the weekend braced for weakness tonight. Friday’s poor performance and the lack of heat in today’s forecast will have many expecting weakness. However, the forecast is clearly drier today than anything we have seen all year and everyone knows that August is a key month for soybeans. Expect little enthusiasm to build downside momentum this week. While I certainly wouldn’t want to rule out some probing in negative territory tonight, I expect the week in general to be more positive and the change to a drier pattern during August could gain traction and encourage some bottom-picking activity. Outside markets will be watched and crude seems to have some technical upside potential, as well as maybe some rising unease in regards to the Iran situation.             

In summary, Friday’s poor performance and the lack of heat concerns will cause some to expect weakness tonight. However, the lack of precip expectations during the next two weeks may be enough to encourage some weather-inspired buying interest. The relatively cool temperature expectations may also return focus to the delayed development pace in corn. I don’t expect much if any weakness tonight and I wouldn’t be surprised to see difficult-to-explain strength.      

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.