Sunday Night Grain Outlook, 6-7-09
Sunday Night Grain Outlook
By Duane Lowry
Sunday, June 7, 2009
OPENING CALL:
Corn= mixed/finishing lower, Wheat= mixed/finishing lower, Soybeans= mixed/finishing lower.
Weather spin should switch to “rain makes grain”, as the vast majority of acreage is planted and off to a very favorable start. From a “best of a bad situation” perspective, remaining unplanted acreage is in the better locations if you wish to view it from a national production perspective. China’s moisture outlook is improved from last week, as is Australia’s forecast. I see nothing warranting an overall bullish spin on weather.
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Wheat has little to trade on its own and what may be the individual focus provides a bearish slant. Row-crop direction and outside market activity can easily influence wheat.
Corn will find mixed calls as some want to say we are too wet. I don’t agree. Others will say traders want to be long before Wednesday’s USDA data. Probably correct, but the reality is that those long positions are already established. I see the trade as saturated with spec length. Crop conditions should remain solidly favorable for the next few weeks. Technical profiles remains vulnerable. A forgotten aspect of Wednesday’s USDA reports is roughly 1.5 bil old-crop carryover stocks. Producers have a lot of inventory and with crop conditions favorable and weather non-threatening, the calendar will be squeezing producers into a decision during the next several weeks. History says price structures have not been kind to producers in similar carryover situations when production threats are lacking. Any early week strength, if it occurs should lack energy and follow-through and be seen as a selling opportunity.
Soybeans will find some traders focusing on planting delays and firm spread tone to finish last week. I see planting progress far enough along that I prefer to shift to a “rain makes grain” mode, when analyzing impact on a global price basis. Technical conditions remain vulnerable. The trade is saturated with bulls. Don’t trust any early week strength.
In summary, I see no reason to view weather as a bullish price influence and any such early week attempt should prove to be a trap. The trade is already fully long, limiting new buying interest before Wednesday’s USDA report. Any weakness could actually trigger long liquidation. We have far too many acres off to a favorable start with no threatening weather concerns visible in the two-week forecast—producers need to start looking to protect current profit opportunities. Crude oil and the stock market should have limited upside potential from current values during the foreseeable future. The US Dollar has found an area to stabilize. Significant transfer of ownership activity has occurred during the past few weeks. We are in the month of the year that similar set-ups have historically produced significant tops. Producers must still view the overall economic situation as fragile and operate with a survival mentality. Current prices “work” and should be handled accordingly.
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