Sunday Night Grain Outlook, 11-8-09
Sunday Night Grain Outlook
By Duane Lowry
Sunday, November 8, 2009
OPENING CALL:
Corn= 1-2 lower, Wheat= 1-2 lower, Soybeans= 3-5 lower.
Weather provided favorable harvest conditions during the weekend. This week's weather will be favorable for most areas, allowing harvest to advance rapidly, with most locations completing soybean harvest this week.
News> India's Finance Minister says their recent purchase of gold from the IMF isn't aimed at reducing the share of US Dollars in its foreign exchange reserves. He said the move was designed to restore the country's gold holdings which had been sold in the remote past at a time when the country was in dire need of foreign exchange to pay for imports. He pointed out that the gold purchase was valued at $6.7 bil, which is a very small percentage of the overall $285 bil India holds in foreign exchange reserves.
Wheat will start lower on follow-through technical selling pressures from last week's weak finish and expected row-crop weakness on harvest pressures. Pre-report positioning may limit selling intensity.
Corn has little reason to find strength. Technical conditions are weak and many longs have now been trapped with losing positions. Harvest is poised to remain aggressive and cash basis tone seems capable of further weakening. Pre-report positioning may weaken selling intensity, but we may have a situation that finds plenty of long liquidation desires may exist on fears of non-bullish USDA data.
Soybeans will also suffer from long liquidation and advancing harvest pressures. Friday's close was the lowest settlement seen since one month ago today. Yet, the trade was saturated early last week with emotional speculative buying activity. USDA is likely to increase soybean production estimates and further weaken an already questionable fundamental foundation. I don't see anything positive here.
In summary, while favorable harvest weather, weak basis tone and the threat of further speculative liquidation will be the initial focus as traders prepare for tomorrow's USDA data, I continue to feel we must very closely monitor outside market price tone. Many markets are poised for significant trend reversal activity, with some signs existing that the turns have already began. If true, the potential for massive speculative investment capital to begin unraveling the very crowded "bullish commodities/dollar demise" storyline will not be bullish the grain markets. Grain/soy values have been exceedingly inflated with speculative capital driven by the expectation of commodity inflation. These bets are heavily dependent upon trending higher crude, gold and to a lesser degree stocks, as well as a trending lower pattern for the US Dollar. All these conditions appear to me to be reversing against the speculative positions that have been VERY popular. If these market trends falter as I suspect they soon will, it will unleash aggressive selling in many commodity markets, including the agricultural sector. Unless USDA offers shockingly bullish surprises, we have conditions that can easily evolve into a multi-month trending lower pattern, as South America has conditions poised to create more bearish pressure on global S&D projections.
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.
© 2009 Duane Lowry. All Rights Reserved.
