Sunday Night Grain Outlook, 7-19-09

Sunday Night Grain Outlook
By Duane Lowry
Sunday, July 19, 2009

OPENING CALL:
Corn= mixed,     Wheat= mixed,     Soybeans= mixed.

Weather provides a cool theme for the Midwest throughout the 2 week outlook. Moisture will be adequate in all but maybe 10-15% of the region. Argentina's wheat areas are expected to receive moisture this week. Some wheat harvest delay concerns exist for northern parts of Europe. Weather will receive a "same as Friday/bearish" spin.  

News>

Wheat will find mixed expectations tonight. Some will point to improving moisture potential in Argentina and overall bearish US/global backdrop as reasons to be lower. Others will be motivated by Friday's firm close and still excessive speculative short positions as reasons to expect upside follow-through to last week's firm tone. I don't know what to expect, but am inclined to believe any price action driven initial strength tonight will lack sustainability as the day/week evolves. All things considered, last week's performance wasn't as aggressive as seemed warranted by the excessive spec shorts and technical conditions. I am afraid we are vulnerable to a new push to new lows during the next 3-4 weeks. Wheat's current premium to corn seems maybe a bit more than can be warranted; suggesting inter-market spreaders won't be supporting wheat much longer. Strength tonight is probably a selling opportunity.                 

Corn will find mixed pre-opening calls, with weather still in the benign/bearish camp, but Friday's strength causing traders to hope bearish weather is already fully discounted. New news is limited. Overall technical conditions appear likely to encourage selling on early week strength. While some hope remains for a quick seasonal bottom, we must also respect the potential for prices to stay soft for another 3 weeks into the August USDA production estimates. If true, downside potential could be another 30-40 cents from current levels. I am concerned that may be the most probable scenario.  

Soybeans will also find mixed expectations, with bulls focusing on Friday's strong performance and bears focusing on continued benign weather forecasts through month-end. Short-term technical indicators are mixed. Trade on both sides seems very possible tonight/early this week, but building sustainable upside follow-through to Friday's performance may be difficult. This market has been marking time, largely waiting to see if a weather threat develops. With forecasts now reaching into the early days of August with no serious concerns, I think we may find more traders willing to sell small strength from current levels as national yield ideas begin to ratchet higher.                             

In summary, there is little new news to discuss. The lack of a weather story may make it difficult to find sustainable upside follow-through to Friday's performance. We seem poised to steadily ratchet national yield ideas higher into the August USDA production estimates. Any minor strength early this week may still need to be seen as a selling opportunity, as prices could be on the defensive during the next 3 weeks of preparation for the August crop data.                

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.