Sunday Night Grain Outlook, 12-14-08

Sunday Night Grain Outlook
By Duane Lowry
Sunday, December 14, 2008

OPENING CALL:
Corn= steady-better,     Wheat= 2-4 higher,     Soybeans= mixed.

Weather provided mostly dry weather for Argentina and southern Brazil. Some light rains will impact parts of Argentina this week. The longer-range forecasts do not offer a generalized rain event, only minor systems with light coverage. Weather will receive a “better keep a close eye on it” assessment. Some may have a tendency to label the weather as bullish…and that is not an unreasonable choice. If the long-range maps verify, areas of concern for soybeans will reach/exceed one-third of Argentina. Some slightly better rain chances exist for parts of southern Brazil.   

News> OPEC’s president says a consensus has been achieved to cut output at its meeting this week and that Russia will likely follow suit with a production cut. The President didn’t define the size of the cut, but said Saudi Arabia will begin cutting production by 8% in January. Iran says OPEC’s goal needs to be $80-100 crude and production cuts need to be drastic enough to achieve this target. OPEC officials indicate the swiftness and magnitude of the recent price decline has created stronger relationships with non-OPEC countries and this will create the best environment ever to achieve such price goals. Saudi Arabia remains the most conservative with price targets, but still has its price objective of $75. President Bush made a surprise visit to Iraq to sign a security agreement that will lead to US troop pullout by the end of 2011. The White House says no official word will occur regarding the auto bailout while Bush is out of DC. The phrase “…I just don’t expect anything for a while,” was used by the White House spokesman. Rumors circulate that Obama’s stimulus package could total $1 trillion over two years. Iraq announced an import tender for wheat.

Wheat will find increased buying interest on weakness and could quite possibly start higher. Outside markets will find some level of disappointment that the White House didn’t announce a resolution to the auto bailout situation and may take longer than most expected to finalize. Yet, most recognize the deal will get done. Crude oil will find support from expectations of this week’s OPEC meeting along with technical indicators that will encourage speculative buying interest. Trade on both sides is certainly possible, but it appears to me that we will start higher tonight.          

Corn will find spillover enthusiasm from last week’s price action and newly invigorated focus on the difficulties corn will face to secure desired US acreage in 2009. South American weather may find mixed spins, but mostly with a bullish or at least not-bearish leaning. Technical conditions will encourage buying on weakness but some reservations about paying up much after Friday’s sharp gains on the heels of previous gains during the week that totaled nearly 65 cents for the week. Expect to see trade on both sides this week. Expect to find some increase in producer selling interest on a test/probe of Friday’s highs. Bullish expectations towards crude oil and what appears to be solidifying support among global crude producers has traders viewing current crude oil prices as just too cheap. This helps the overall psychology of the corn market. 

Soybeans will find mixed spins initially. Outside markets will be seen as supportive, with focus on crude. Last week’s price action will be seen as supportive and building buying interest under the market. South American weather spins will be mixed, but easier to slant towards something bullish than something bearish. Overall fundamental focus will be a drag because of rising recognition that 2009 US acreage could balloon without some fairly dramatic changes in US corn profitability projections. Trade on both sides seem probable this week, with selling interest in November 09 futures on rallies.                   

In summary, expect to find divergent opinions tonight. Expect selling interest to build in new-crop soybeans. Expect buying interest to surface under the market in most all commodity markets on general belief that the capitulation selling 2 weeks marked a major bottom. Crude oil is seen as too cheap and traders believe OPEC could show aggressive desires to lower production and maybe extraordinary unity in its resolve to raise prices by an appreciable amount during the next few months.       

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.