Sunday Night Grain Outlook, 9-20-09

Sunday Night Grain Outlook
By Duane Lowry
Sunday, September 20, 2009

OPENING CALL:
Corn= 1-2 lower,     Wheat= 1-2 lower,     Soybeans= 1-2 lower.

Weather offered limited weekend precip. Frost concerns are diminishing, but some cool temperature expectations for the Sep 30-Oct 2 period will be monitored. At that point, any national soybean production losses would be extremely minimal, with corn losses limited and unworthy of an impact on the price discovery process. From here forward, it would seem combine yield reports will be the only yield discussion point worthy of influencing price discovery ideas. Active moisture expectations for this week, producing 75% coverage of the Midwest and near general coverage of the Delta will slow harvest activity. China has no weather concerns. India concerns associated with several weeks of less than desired moisture appear to be solidifying and will lead to lower production ideas. From a frost perspective, weather is not bullish, but from a "slowing of activity" perspective, moisture expectations may limit new selling interest.     

News>       

Wheat has little news of its own to focus upon. Price action has been stabilizing for the past two weeks in a choppy/sideways pattern. Short-term technical indicators are mixed. I find myself pondering the idea that we could experience some tech-based short-covering activity this week. Establishing/holding short positions on any early week weakness could be a trap. I shudder to type the following words, but I wonder if early week weakness may not be a buying opportunity for wheat? I wonder if the approaching end of the month/quarter and the past two weeks of stabilizing price action isn't a combination worthy of creating a short-covering event.                  

Corn will find bearish confidence building early this week. This will be driven by Friday's late weakness and overall rejection of last week's strange/unsustainable frost rally that occurred on Tuesday and was completely erased by Friday. The fundamental backdrop is bearish and you can sense traders/analysts finally beginning to embrace/accept the bearish fundamental storyline. That all said, short-term technical indicators offer mixed elements and this week's harvest slowing moisture expectations could limit the ability to build momentum upon early week weakness. If we could somehow produce limit-up trades one day last week, why not at least consider the possibility of a "both sides" trade this week? Also, as mentioned above, I am pondering the potential for wheat to unleash a short-covering even this week, which would have spillover implications to corn. While I firmly believe we have more downside to experience during the next few months, I am suspect it may be a trap to establish/hold short positions with early week weakness. Technical support will begin to surface 3-4 cents below Friday's settlement price.       

Soybeans will find the week beginning with increasing bearish confidence among traders. Frost fears will be seen as behind us and overall price action will be seen as weak. Traders are beginning to also embrace a longer-term more bearish outlook, assuming a normal South American growing season. Short-term technical signals are mixed. IF wheat and corn perform as discussed above, soybeans may find it difficult to build upon early week weakness as well, possibly setting the stage for a week of sideways/choppy activity.                                 

In summary, it appears to me that trader sentiment is quickly moving towards the bear side and with increasing confidence. Weather doesn't seem bullish, but plentiful moisture in the Midwest and Delta this week may limit harvest advancement enough to keep weather from being labeled bearish as well. Technical signals are mixed. Outside markets offer mixed expectations for this week's direction, with notable data not released until Thursday and Friday, possible setting the stage for sideways activity for much of the week there as well. While the apparent building bearish sentiment and confidence among grain/soy traders will likely lead to an increase in selling interest tonight/tomorrow, I am suspicious price action will perform better than expected as the week evolves and early week weakness could be a trap for the bear, with wheat offering the most interesting potential for a short-covering event to unfold.                    

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.