Sunday Night Grain Outlook, 6-21-09

Sunday Night Grain Outlook
By Duane Lowry
Sunday, June 21, 2009

OPENING CALL:
Corn= 2-3 higher,     Wheat= 1-3 higher,     Soybeans= 4-6 higher.

Weather continued to push very hot temps on the Delta, parts of the southern Midwest and Plains region during the weekend. Many of these areas will continue to experience extreme heat this week with limited precip. Northern Arkansas will experience 100 degree temps all week. St. Louis will be 94-98 all week with limited moisture potential. Minimal precip totals will occur south of I-80. So while some Midwest acres will continue to benefit from favorable combinations of temperature and precip, we do have some areas of concern developing. China will face hot & dry conditions this week, but concerns will initially be limited because of last week's moisture. India's monsoon concerns may be increasing with today's weather outlook. I don't think too many traders will look at weather and decide now is a good time to initiate new short positions, especially in light of how much "what if" price premium has been removed during the past several days.   

News> Nigerian militants attack three Shell oil facilities. Protests in Tehran become violent.

Wheat will start higher on ideas Friday's late weakness was overdone and influenced by last second forced liquidation pressure from margin issues resulting from the sharp grain price declines of the past several days. Wheat harvest weather is favorable in the US hrw region. Technical conditions do not appear conducive to building or sustaining downward momentum at this time. Wheat is due for a notable corrective rally event, probably firming into the June 30th USDA reports.                

Corn will start higher on ideas Friday's late session weakness was overdone and influenced by forced liquidation pressures before the weekend. Margin call selling pressures should have culminated with Friday's close. Weather remains favorable for much of the Midwest, but extreme heat in the Plains, the Delta and parts of the southern Midwest and its expected duration seem too troubling to ignore. While Friday's closing markets might mask Informa's acreage data, the truth is that we need exceptionally good national yields in 2009 to avoid a very tight situation. Even more striking is the apparent need for significantly more corn acres in 2010. We have a bullish foundation to the corn market, the question is timing. For me, we have had enough of a sell-off, created enough of an oversold technical profile and liquidated much of the top-heavy price length that had developed during early June. Corn should have limited downside potential at this time from current levels. Upside potential will be determined by weather and final acreage data. We seem to have many conditions that would warrant a short-covering rally event into the June 30th USDA reports. 

Soybeans will find mixed sentiment. Weather spin will be mixed, depending upon where you wish to focus. Friday's price action was weak and many will say charts are poised for the next down leg to unfold. I agree with some bigger picture, longer-term downside potential, but we may still be a few weeks away from unleashing that scenario.                           

In summary, expect to find mixed expectations tonight. Focus on the northern half of the Midwest will result in generally favorable/non-threatening conditions. Focus on the southern Midwest, Delta and Plains will find increasing concerns and crop stress throughout much of the next two weeks. Any weakness tonight should lack the ability to build downside momentum or be sustained. The job of this recent price slide was to liquidate the top-heavy length that had been established during late May and early June. This has been accomplished. We have legitimate foundational fundamental support and we absolutely need very favorable national yields in 2009. With the temperature profile in the southern half of the US and the approaching June 30th USDA data, it appears to me that the market has removed too much "what if" price premium. I expect price recovery this week, possibly by a significant amount.              

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.