Monday Night Grain Outlook, 5-25-09

Sunday Night Grain Outlook
By Duane Lowry
Monday, May 25, 2009

OPENING CALL:
Corn= 2-4 lower,     Wheat= 1-3 lower,     Soybeans= 5-7 lower.

Weather provided less than expected precip across the Midwest during the weekend, both amounts and coverage. This week’s precip expectations are similar to Friday’s forecast, with a 5-7 day span of dry weather following this week’s rains that move out of most key areas by Thursday. Spring wheat will experience favorably dry weather for much of the next 10 days. Approximately 25% of the US hrw wheat region needs to seem improved moisture, after missing opportunities this week, with some moisture chances seen in the 6-10 day forecast. Significant planting progress has occurred in key areas. Most acres planted have been experiencing favorable weather conditions. While we still have some key acres to plant, it is becoming a bit difficult to look at the entire weather/crop situation and justify a bullish market reaction.       

News> Fertilizer prices are falling for South American producers, significantly lowering 2010 production costs from year-ago values. This and rising soybean prices has greatly enhanced profit opportunity calculations and is expected to increase 2010 acreage and production potential.

Wheat will lean lower on expected row-crop weakness. Wheat technical indicators are vulnerable and don’t seem likely to generate sustainable follow-through activity to Friday’s strength. Global weather/crop concerns can easily find mixed or countering topics to focus upon.                

Corn will start lower on better than expected planting opportunities during the past weekend. Crops that have been planted have favorable conditions and are off to a good start. The US Drought Monitor offers no areas of concern and the current two-week forecast is non-threatening. As the unplanted acreage figure declines, it will become increasingly difficult to view “weather” as bullish. Corn has experienced a lot of public buying energy during the past several days, but price action has been less than stellar and seems to have underperformed considering the intensity of this public buying. If price action falters this week, it may not take much price weakness to begin unleashing liquidation activity in a manner that could develop into a 2-week styled correction event. Technical indicators are vulnerable at this time. I wouldn’t want to rule out trade on both sides of Friday’s close either tonight or early this week, but I strongly question the ability to build sustainable upside momentum at this time.

Soybeans will start lower on slower arriving rains and lighter than expected amounts during the weekend, allowing better than expected planting progress. Planting dates for soybeans has always been a more difficult item to turn into a bullish market point. Notable weakness in the July/Nov spread, despite emotionally-charged rhetoric towards this spread early last week strongly warns of a problem for the bull. Anecdotal comments from the country continue to suggest the trade must assess the potential for larger 2009 US soybean acreage. Looking towards the horizon, South American producers are seeing input costs decline and recent price advances have added to 2010 profit opportunities and conditions are moving in the direction to maximize an acreage increase next year. Technical conditions are vulnerable to weakness. Here too, trade on both sides of Friday’s close shouldn’t be ruled out for early week activity, but the ability to build sustainable upside momentum at this time is in question.                          

In summary, we seem poised to start lower, but trade on both sides shouldn’t be ruled out early this week as many want to buy a break. That said, the type of emotional buying found last week is always susceptible to being challenged and often must experience some liquidation phase, even if the merit of the position is solid. We may be at a point where favorable conditions on the majority of acreage will begin to exert more influence than the concerns about the unplanted acreage.              

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.