Sunday Night Grain Outlook, 8-10-08

Sunday Night Grain Outlook
By Duane Lowry
Sunday, August 10, 2008

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

Weather will be seen as non-threatening. Some areas may desire a little better precip. Some will argue that the cooler temperature trends may not be the most desirable for crops that have been behind all year and wish to avoid early frost problems. Yet, from a market influence standpoint, we are back to non-threatening overview.  

News> Russia has stepped in to take control of the Georgian situation, with a clear and decisive plan for quick and dominating action. The Deutsche Bank has told clients to get out of commodities, citing slowing demand in China and basically globally. This news is just another piece that strongly suggests the institutional investment community has lost its “buy anything” commodity insanity. Without commodities being seen as an “investment” vehicle, it could be a painful realignment process on many entities. At the present time, traders are very much struggling with the job of determining fair value. In this type of environment, it is sadly the producer that has the most vulnerability and will see quick and severe pressure on profit margins.

Wheat could see trade on both sides. A lack of news and Friday’s weak performance will legitimize expectations for weakness. Oversold conditions and lack of enthusiasm for new positions in front of Tuesday’s USDA reports may limit willingness to sell weakness and possibly lead to a bounce. Anxiety about the entire Black Sea region could cause some firmness in world wheat values, but this storyline certainly didn’t carry weight Friday.    

Corn will start easier on benign weather interpretations, weak price action and expanding ideas that the “bullish commodity” sentiment from the investment community has come to an abrupt end. National crop production ideas continue to climb higher and traders generally expect bearish data from USDA on Tuesday. Oversold conditions and ideas most of the forced liquidation activity has already occurred could justify trade on both sides tonight/tomorrow.  

Soybeans will also lean easier for all the same general theme topics. New news is limited.              

In summary, bullish trader demoralization has morphed into full-scale bearishness in some sectors of the ag trade, especially more fundamental-based traditional participants. Crop size estimates continue to climb and prices are seen as still historically very high. With growing belief that the investment community is done sponsoring bullish postures, fear about downside potential is escalating.      

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.