Sunday Night Grain Outlook, 8-17-08
Sunday Night Grain Outlook
By Duane Lowry
Sunday, August 17, 2008
OPENING CALL:
Corn= 2-3 higher, Wheat= 1-3 higher, Soybeans= 7-10 higher.
Weather will find mixed reviews. Some will talk about relatively benign weather with some rain chances existing. Some will talk about dryness concerns, but those same concerns were talked about Friday and the market was much weaker than this crowd considered possible. Despite the fact that this “dryness talk” wasn’t able to rally markets on Friday, I think it should be given some respect tonight/this week. It is a story that has the potential to develop legs as the week evolves.
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Wheat experienced notable weakness Friday and has tested an area that should provide technical support. Wheat should experience fundamental-based weakness for the foreseeable future, but that alone doesn’t prevent rallies—yet it may limit the rally efforts and should certainly see wheat lose to both corn and soybeans from a relationship standpoint. Technical indicators suggest this market has some room to rally, but any rally attempt will fall short of last week’s highs and needs to be seen as a long-term selling opportunity in the July 09 slot. Wheat needs to concede some acreage back to corn/soybeans for 2009 and the price discovery process must very quickly go forward on that mission and see corn gain on wheat, possibly by a significant amount. Expect “me-too” strength this week, but limited sustainability.
Corn will start higher on dry weather concerns. Yes I know the market didn’t respond to this type of talk on Friday, but we are now in a better technical position to encourage buying sentiment. The Pro Farmer Crop Tour will occur this week and it seems very likely that we will hear plenty of comments to fuel anxiety towards 2008 production. Crop Condition reports Monday afternoon are also expected to show seasonal declines and impact from recent dryness, as well as slow development concerns. Yield ideas are quite wide-ranging, but the voice of those who doubt USDA’s production estimate will likely be the loudest this week. It may be wise to respect upside potential this week.
Soybeans will start higher on weather/dryness concerns. Technical conditions are poised to encourage buying of strength. It is August and traders are likely to quickly focus their bullishness on soybeans. This market has plenty of room to rally. Be careful not to underestimate the ability to rally in this time/price zone.
In summary, all markets are in a good position to embrace weather concerns and encourage new buying interest, even on strength. Bears need to be careful. I wonder if we aren’t in a position to unfold much more price strength during the next couple weeks than what the demoralized trader sentiment that has developed during the past several days is ready to grasp. It seems very possible that we may be about to unfold that “one last production threat” rally phase. Markets remain on a fast track and traders need to be flexible. It may be time to run the market back up for a while. Producers need this rally—stay alert.
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.
