Thursday Night Grain Outlook, 11-26-09

*Be sure to check-out Duane’s Market Commentary Blog on FarmAssist.com. You can find a link to the blog at the bottom of the Market Commentary section on the homepage.

by Duane Lowry
Thursday, November 26, 2009
*Happy Thanksgiving!
Expectations for Thursday night's trade:
Corn= 3-5 lower,     Wheat= 3-5 lower,     Soybeans= 10-15 lower.

Weather will provide some challenges to final harvest activities in the east, but market focus is minimal. South American weather forecasts for the next two weeks are generally favorable. 

Wheat will start lower on technical conditions that are not conducive to creating sustainable strength to yesterday's gains. Overall technical conditions suggest Wednesday's rally was corrective in nature and recent lows should soon be violated.                             

Corn will start lower on ideas Wednesday's gains were overdone. Technical conditions suggest a major topping process is complete and we have begun new down trends that may evolve into a several month price weakening period. Outside market weakness will also catch commodity bulls by surprise and trigger liquidation selling activity.                                            

Soybeans will start lower on outside market weakness and Friday's goofy settlement prices that were actually approximately 7 cents higher than the last trades on the electronic platform. Fundamental news from China will also provide a bearish slant, as details of a new government purchase program will make domestic supplies more accessible and at a cheaper price than imported soybeans, likely reducing China's soybean import pace until the period where South American supplies become available. (See the "News" section below for details.)                  

In summary, while technical conditions are certainly poised to suggest Wednesday's strength was in fact the "correction" and not the "trend", it is the developments in the outside markets that will put commodity prices on their heels tonight. Many markets have been poised and vulnerable to major price turns. Crude, wheat and corn have already showed a pathway and we may be seeing other markets seek to join that pathway, beginning tonight. The key here in my mind is to recognize that price trend changes now for many of these markets will prove to be MAJOR turns and lead to several weeks/months that experience a much different market personality. It is also very important to remember that the foundational fundamental support is not very encouraging any of these commodity markets. Recent gains have been attained and maintained solely because of outside market based investor speculation. Once these markets begin to show "turns", we are at the time of year where speculators/investors will be quick to protect profits with the end-of-the-year just ahead. This "protecting" will lead to selling pressures in a host of markets and a notable recovery in the US Dollar. At 10:25 this morning: Crude was down $1.55, Gold was down $4.30, Dow Index was down 179 and the US $ was up 61.

NEWS: Russia's Ag Minister says the 2009 grain harvest will total 93 mmt, including 58 mmt wheat. It will satisfy all domestic needs and ensure grain exports potential of 19 mmt. Russia's 2010 winter grain seeding was up nearly 8% from last year. The International Grains Council says 2010 global wheat acreage will decline only slightly and still be 2% above the 5-year average. The Swiss National Bank intervened in foreign exchange markets to buy dollars and sell francs. This is the first time they have sought to support the franc vs the US Dollar. Currency traders were quite surprised to see this effort. Brazil was also seen buying US dollars. China announced details of their plan to begin purchasing domestic soybeans from large producing areas. The price paid will be higher than last year and subsidies will be given. This will cause domestic crushers to seek more aggressively domestic supplies and rely less on imports. Given current price relationships and the understanding of the level of government subsidies offered, crushers in the northeast will be able to purchase domestic soybeans at approximately 10% less than current prices of imported soybeans. Crushers in coastal areas which tend to focus on cheaper imported soybeans are also expected to see enough subsidy incentive to focus more on domestic supplies than they normally do. The new government purchase plan will begin Dec 1st and continue through April 30, 2011.

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.