Sunday Night Grain Outlook, 7-5-09

Sunday Night Grain Outlook
By Duane Lowry
Sunday, July 5, 2009

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

Weather delivered 55% coverage in the Midwest during the weekend, near expectations. The Delta was disappointed with only 25% coverage of mostly light amounts. Delta precip during the next 5 days will be limited to the far south. Midwest rains will favor northern areas. Some areas will experience extreme heat this week. Greatest concerns for extended heat stress will be KS, parts of the Delta and southern sections of NE. Approximately 25% of the Midwest will experience dryness concerns through the next 10 days: OH, northern and eastern IN, southern IL, and southwestern IA. Slightly more than one-third of the Delta will experience building moisture stress during the next 2 weeks, with opportunities for expansion of the ridge into these areas at times. China's driest areas of concern have already experienced yield-reducing crop stress from heat and dryness. Some rain chances exist this week and it will be important these forecasts verify, as the 6-10 day is back to dry. Argentina continues to have a dry outlook for the next two weeks. Concern levels continue to ratchet higher.
*I thought it was interesting to look at precip as a percent of normal during the past 30 days. I was surprised to see the amount of acreage falling in the 25-75% of normal category. Most of this probably isn't involved in crop stress today, but it would suggest that any shift to a more threatening heat environment could very quickly create problems.
*It is very difficult to say weather is anything but a bearish influence, as any assessment of crops/weather can only lead to an exceptional overall condition rating. National yield would appear to be quite good. However, the map below does warn that conditions need to remain benign, as any sudden surprise shift towards a ridging outlook could quickly elevate concerns. It is also worth reminding everyone that this year's delayed planting windows create a situation where the pollination window will be quite large, providing a longer timeframe that will be vulnerable to temperature concerns. So while weather doesn't appear very concerning at this time, at some point market prices reach a point where this is fully discounted. Utilizing trader sentiment and technical oversold indicators as guidelines, it would appear that such a situation should be at hand now.

News> Russia has lifted its ban on swine and pork imports from four US states—Illinois, Pennsylvania, Texas and New Jersey. President Obama will visit Moscow Monday through Wednesday in an effort to reset relations with Russia. North Korea test fired several missiles. There was a lot of discussion in news circles this weekend about the potential for an Israeli strike against Iran, with VP Biden indicating Israel is a sovereign nation and can do what they deem to be in their best interest. One news report in the London Times says Israel has been assured by the Saudis that Saudi Arabia would look the other way on any Israeli aircraft on a mission to Iran, saying an Israeli air strike mission to Iran would also have common elements with Saudi interests.

Wheat will lean easier on expected weaker weather-related start for corn and soybeans. Argentine dryness concerns are increasing. Short/intermediate-term technical indicators are oversold and not conducive to inspiring new short positions. Any early weakness here should be minimal and may be difficult to sustain.                

Corn will start lower on non-threatening weather amid overall exceptional national crop conditions. Some areas have missed rains and are likely to experience dryness concerns during the next two weeks. However, any heat threats remain appear short-lived it requires an imagination to label weather as bullish. That said, we have the right overall set-up of oversold conditions and fully liquidated markets to at least ponder the possibility that current prices levels have discounted favorable conditions. Word that Russia will allow the import of at least some US pork will help to support livestock sentiment; possibly helping to shed the most pessimistic influences on grain feed usage expectations. Corn needs to find help from some other influences?  

Soybeans will find some early bearishness on weather. However, overall technical conditions and market sentiment will still likely produce some buying interest on weakness from multiple market sectors, making it difficult to build any downside momentum.                           

In summary, the lack of a clear weather threat will allow for an easier start tonight. Oversold and fully liquidated conditions may make it difficult to find adequate desires to establish new short positions on weakness. I find it very difficult to know what to expect, as we have many conditions present that would allow for market prices to cease declining on ideas bearish factors have been fully discounted.