Sunday Night Grain Outlook, 10-25-09

Sunday Night Grain Outlook
By Duane Lowry
Sunday, October 25, 2009

OPENING CALL:
Corn= steady-better,     Wheat= steady-better,     Soybeans= steady-better.

Weather provided 35% moisture coverage of the Midwest through the weekend. Harvest opportunities for this week will be limited, with 90% coverage seen through the next 5 days, with slowest conditions seen in central and eastern areas. The 6-10 day forecast continues to provide slow harvest conditions for the north, while the southern Midwest may see improvement. All areas see improvement in the 11-15 day window. The Delta has a wetter 1-5 day forecast than it had Friday, but the 6-15 day period offers improved harvest opportunities.      

News> Nigerian militants have agreed to a government offered indefinite ceasefire and dialogue engagement. China, Japan and others presented plans for a unified Asian trading block. Japan seeks to have a role for the US, while China seems to lean for stronger ties with just Southeast Asia. Both claim the goal is to reduce Asia's economic dependence on American consumers China and the 10-member Association of Southeast Asian Nations (Asean) have nearly completed the first phase of a promised $10 bil China-Asean investment fund and will soon begin investing in Southeast Asian infrastructure. In addition, China says it will provide $15 bil in credit to Asean countries for infrastructure spending. The Asean group represents one-third of the world's GDP and half the world's foreign reserves. The success and apparent movement towards unifying the region and strengthening their economic ties with a clearly reducing dependence on the US is causing concern in Washington. Thai's Prime Minister said, "The old growth model, where, simply put, we have to rely on consumption in the West for goods and services produced here, we feel will no longer serve us as we move to the future." President Obama declared swine flu a national emergency. More than 1000 people have died in the US from H1N1 since April.           

Wheat will start higher on expected initial row-crop strength associated with harvest delay concerns. Fundamental merit for recent price gains in wheat is questionable, if you believe it exists at all. Friday's reversal-down price action will encourage the technical sectors of the trade to begin looking for selling opportunities in any recovery bounce from Friday's sharp retreat from the session high.                     

Corn will start higher on continued harvest delay concerns. Friday's reversal-down price action may be enough to encourage selling interest on strength from technically-driven traders. Some may also believe the weather storyline may have already reached its climax point of influence, with improved later phases of the two-week outlook providing some hope. While harvest is clearly delayed and will remain slow, actually corn harvest losses will remain minimal. Most yield reports remain very favorable.

Soybeans will start higher on a harvest delay theme. Technical resistance should be found up 10-15 cents. Outside markets must continue to be watched very closely, having potential to be more of an influence on the price discovery process as the week unfolds.                                 

In summary, Friday's weak price action may have some influence by encouraging some sectors of the trade to look for selling opportunities, but the initial focus tonight seems most likely to be the harvest delay theme. It is possible that Monday afternoon's harvest progress exceeds trader expectations, especially for soybeans. If true, we could see trade focus on harvest delay concerns greatly diminish the balance of the week. Because of this, weather bulls need to ponder the possibility that Friday's inability to hold sharp gains amid elevated emotional bullish sentiment may in fact have been an early warning sign that harvest delay concerns are beginning an evolution of a diminishing role in the price discovery process. Outside markets offer many "trend may end at any time" warning signs and when these signals change from "warnings" to "confirmations", the influence on the grain trade will be negative. Consequently, they must be continually and closely monitored in the weeks to come. Friday's price action in the outside markets are moving towards the "confirmation" side of the spectrum.                    

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.