Sunday Night Grain Outlook, 10-19-08
Sunday Night Grain Outlook
By Duane Lowry
Sunday, October 19, 2008
OPENING CALL:
Corn= mixed, Wheat= mixed, Soybeans= mixed.
Weather will create some temporary harvest disruptions during the next week.
News> OPEC’s chief says there should be a substantial cut in crude oil output at this week’s emergency meeting in Vienna on October 24th. He said if it needs to be 1.5 or 2.0 mil barrels per day or whatever it must be to get the supply/demand in balance and generate a stable price for crude oil through the first half of 2009, with OPEC’s target range now said to be $70-90. OPEC says current global demand has fallen by 3 mil barrels per day. Collin Powell says he is endorsing Barack Obama. Newt Gingrich expects significant inflation by mid-2009 under a Democratic agenda.
Wheat will seek direction from outside markets and initial tone in corn and soybeans. New news is limited. Technical conditions will provide some encouragement and buying interest on weakness. We seem poised for more upside movement, but everything still seems to hinge on finding stabilization in the financial sector.
Corn will also seek initial direction from the outside market tone. New news is limited. OPEC appears determined to put a floor on crude oil values and appear poised to dramatically reduce production in the weeks ahead. A stabilizing/firming crude oil market is essential at these prices to establish a floor to corn prices at this time. I believe crude will find stabilization/firmness in the weeks ahead. I believe corn, based on cost of production and profit opportunities in relationship to other crops will lose corn acres from 2008 levels if net revenue doesn’t improve for corn. Even with a recession as a backdrop, we can’t afford to lose corn acres in 2009. It also appears likely that USDA will be willing to provide some type of support to the ethanol industry to keep them producing at the mandated level of production. Technical conditions will provide encouragement to buyers on weakness early this week, likely limiting the ability to build/sustain downward momentum to any early week weakness.
Soybeans will also be held captive to outside market tone. Cash basis levels will continue to firm, as the crop gets put away and producers show no interest in making sales any time soon.
In summary, once again it will be the tone of the outside markets that provide initial direction tonight. However, stabilization signs have been found in price action of the past several days and technical conditions should provide some buying encouragement and limit the ability to build downside momentum early this week. Stock market followers are also beginning to compare the recent crash with other historical downdrafts and are building cases for investors to come back into the market and look for opportunities. While a longer-lasting recessionary period seems almost a certainty, grain prices need only to see the panic and fear of something much worse removed for grains to divorce themselves of this intricate following of the financial markets that has evolved during the past few weeks. I continue to contend the fear and panic stage is in the past and declining from here forward. I am bullish all US $-based commodities at this time. I expect a weak US $ trend to unfold during the next several months, providing the key element for agriculture prices to find higher values during the next several months, despite some aspects of weak fundamental foundations. Early week weakness this week should be seen as a buying opportunity.
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.
