Sunday Night Grain Outlook, 7-12-09

Sunday Night Grain Outlook
By Duane Lowry
Sunday, July 12, 2009

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

Weather provided 45% coverage of the Midwest during the weekend of 1/4- 1 1/2, locally 3 1/2 inch rains. The next 5 days will produce 65% coverage. The temperature theme during the next two weeks will be mostly cool. Precip will be more limited after this week. Some dry areas of concern do exist, but the lack of a heat threat means national production ideas will stay optimistic and begin to solidify, especially for corn. Approximately 25% of the Delta will remain concerning through the next two weeks. Overall weather will receive a bearish spin tonight.  

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Wheat will lean easier on expected initial weakness in the row crops on non-threatening weather evaluations. New news is limited. Technical conditions are attempting to produce price consolidation. Fundamental profile is bearish, but widely known and based on large speculative short positions versus historical comparisons, possibly near being fully discounted. That all said, trade attitudes are quite demoralized and new buying interest will be difficult to find. The best hope of buying activity may need to come from existing shorts looking to take profits and step aside.                 

Corn will start lower on non-threatening weather expectations. Technical conditions are beginning to possibly offer some hope of consolidation unfolding, but bearish fundamental profiles and the lack of a weather threat will limit new buying activity. In fact, we may be in a position where some sectors of the trade are willing to establish new short positions. Without a bullish weather storyline, it is possible we still have to go through the phase of absorbing new short positions. This market needs help from some outside influence or weather or something. Otherwise, it appears possible that we will find new selling energy and desires to build new short positions.  

Soybeans will start lower on non-threatening weather. This market still has potential for an upside run, but probably not without some help from weather concerns. Those weather concerns don't exist tonight and based upon the forecast, some will struggle to see when/if the next weather concern will develop. Trader attitude is mixed, with some sectors very anxious to sell soybeans believing soybean prices are too high in relationship to other commodities, especially without weather concerns. Others point to ideas the fundamental foundation is solid and we still have plenty of very important stages of the growing season to navigate. Technical conditions will encourage buying interest to surface around last week's lows, limiting any ability to build downside momentum even if those lows were to be jabbed.                            

In summary, initial weakness will be driven by the lack of a weather concern. Some may point to Friday's late strength and apparent rejection of bearishly slanted USDA data as a reason to buy any initial weakness. Trade on both sides tonight is not an unreasonable possibility, but building upward momentum may prove difficult. Technical conditions will encourage some buying interest to develop around last week's lows, but buying may be timid as it is also reasonable to consider the possibility that we may have quite a bit a new selling interest to absorb as traders begin to ponder solidifying ideas of rising national yield expectations, especially for corn. In other words, while much of the recent downward price pressure was attributed to long liquidation, the lack of a weather threat may suggest we still will need to absorb a period of time where traders begin to embrace the bearishness and expect even more downside and establish new short positions. It is possible that just absorbing the liquidation selling won't be enough to say values have discounted bearish fundamental profiles. It may be that we need to now see traders get excessively too short?                

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.