Sunday Night Grain Outlook, 10-26-08

Sunday Night Grain Outlook
By Duane Lowry
Sunday, October 26, 2008

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

Weather will provide generally favorable harvest weather during the next two weeks, with minimal and short-lived delays.   

News> London media is reporting that European leaders are discussing plans to speed up the introduction of genetically-modified crops and foods. News services are reporting that central banks are likely to announce more coordinated action this week. The Fed is expected to lower interest rates again. There is talk the G7 or G20 may soon intervene in the currency markets to weaken the US $ and strengthen emerging market currencies. Iraq announced a new wheat import tender. Italian businesses have called for the European Central Bank to drop interest rates by 1% immediately and another 1 point by the end of the year. Syrian media is reporting that US helicopters attacked a village inside Syria, near the Iraq border.

Wheat will lean easier on Friday’s late weakness and lack of any new financial developments during the weekend.        

Corn will lean easier on Friday’s late weakness and lack of any new financial developments.

Soybeans will lean lower on Friday’s late weakness and lack of any new financial developments.                 

In summary, there is no news and no focus on any traditional fundamental storyline. The focus remains price action, recession fears and continued lack of investor confidence. With all that comes a leaning for weakness tonight. However, global financial markets should be able to find some hope in Friday’s “better than feared” performance by US markets. Some may also find interest in expectations of an imminent drop in interest rates this week, possibly some globally coordinated effort to lower interest rates. So, there will be some that seek to find “hope” that grain prices can show stabilization and recovery efforts tonight/this week. In reality, the grain markets need to find strength in the crude oil market to justify maintaining “value” at current prices, which can still be argued are too high based on historical relationships between supply and demand. We all know that the high prices of this spring and early summer were not warranted based on any historical understanding of price relationships, but were justified by energy costs that suggested new price values that were needed to cope with the core principle of energy values. Consequently, the burden to justify current agricultural prices remains with the energy prices. I do not believe we are headed back to energy price levels that will be needed to justify the “pre-ethanol boom” ag prices, but validity of that opinion rests completely on the ability of energy prices to define current energy values as the “cheap” side of possible energy parameters during the next several months and beyond. I am bullish agricultural prices at these levels, but we must see energy prices stabilize and strengthen to validate that expectation. While I am offering “steady-easier” calls tonight, I really expect some price recovery in the grain trade.      

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.