Sunday Night Grain Outlook, 8-9-09

Sunday Night Grain Outlook
By Duane Lowry
Sunday, August 9, 2009

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

Weather provides some increasing dryness concerns for parts of China. Weekend US Midwest precip favored the north. US temperature concerns will be limited and of short duration. Some US moisture concerns might be found, but the lack of heat limits the level of concerns.    

News> Consumer credit outstanding fell more than double expected, falling for the 5th consecutive month in June. Consumer spending is a key component for the US economy (making up 70% of GDP) and continues to lag hopeful expectations of economic recovery. The number of people in the US on food stamps topped 34 mil for the first time, surging 2% in May. India's Prime Minister says delayed and erratic monsoon rains across India have adversely impacted crop sowing operations and it may have an inflationary affect on food prices in coming months. 

Wheat will start lower in sympathy with expected row-crop weakness on non-threatening weather conditions. New news is limited. However, short-term oversold conditions are quite notable and it won't surprise me to quickly see price recovery on a lack of new selling interest and short-covering ahead of Wednesday's USDA reports.                 

Corn will also see trade in negative territory early in tonight's session on non-threatening weather and expectations Friday's poor performance will find follow-through selling activity. Some will want to focus on the surprise increase in speculative long positions as seen in Friday afternoon's C-O-T report. However, this report data is always "as of" the previous Tuesday. At that time, we were still on a sharp rally and it shouldn't be a surprise that new buying activity was occurring. The sharp break that occurred the following 3 days makes any bearish spin associated with the C-O-T report old news. It would appear to me that traders who seek to sell corn tonight based on Friday's C-O-T report are fishing well behind the net. Weakness tonight is probably a short-term buying opportunity.    

Soybeans seem capable of starting lower on generally favorable weather. Short-term technical indicators also seem vulnerable to some initial weakness. However, ongoing concerns about dryness in India and China may provide some supportive weather spin. Price action has also been extremely resilient and acts as if it needs to experience more upside movement. The soybean market trades in a manner that seems to suggest we should expect a bullish slant to Wednesday's USDA reports. Expect weakness tonight to be well supported.                             

In summary, most things seem to suggest we should expect some weakness early tonight. However, I am inclined to think short-term traders should view weakness tonight as a buying opportunity. Longer-term downside potential remains in all these markets, but it won't surprise me to see this week prove to be a rally week, led by post-report soybean strength.                

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.