Sunday Night Grain Outlook, 2-28-10
Sunday Night Grain Outlook
By Duane Lowry
Sunday, February 28, 2010
OPENING CALL:
Corn= steady-better, Wheat= steady-better, Soybeans= steady-better.
Weather will continue to keep northern Brazilian soybean harvest slowed during the next 10 days, but concerns are limited. The US Midwest will experience a wet 6-10 day period, but warming temps this week will be welcomed.
News> A bailout financing plan for Germany emerged during the weekend, involving German and French entities. Some believe the deal could be completed by Friday and will involve 30 billion euros. France's Finance Minister Christine Lagarde said this morning, "I have no doubts that Greece will succeed in refinancing itself through ways that we are exploring at the moment." Iraq bought 380 tmt of Russian and Canadian wheat. Chile is the world's number producer of copper and this weekend's earthquake will cause at least temporary disruptions to the supply channels.
Wheat will start higher on firm price action that managed to produce nearly the highest close in 1 1/2 months and amid ideas we are poised to trigger additional short-covering activities. New news is limited and the fundamental backdrop is and will remain bearish. However, this is all known and we have still managed to trap the spec community with excessive short positions. Wheat has a history of similar situations creating strange and difficult to explain price rallies.
Corn will start higher on firm price action and continued short-chasing activity after posting the highest closing value Friday that has been seen in the last 1 1/2 months. Some will also expect the new month to bring new speculative investment buying energy. The US Dollar is likely to be weaker after weekend developments suggest a debt solution for Greece is being worked out by France and Germany, with strong hopes of a final package announcement by the end of the week. Spring fieldwork delay anxiety has been percolating for several days and the turn of the calendar may bring that discussion more energy, especially since price action is firm and will be quick to embrace any bullish storyline. Some bullishness is also focused on the March 9th USDA S&D report, when they will also release results of the "resurvey" of corn's final harvested acreage and any production adjustments. Technical conditions remain supportive and I wouldn't want to rule out another 20 cents of upside potential. However, producers need to view additional strength as selling opportunities, believing that background fundamental foundations are worthy of creating a price ceiling this spring and possibly during the summer as well.
Soybeans will start higher on a firm price action theme and expectations the US Dollar will experience a weak tone this week, which will likely buoy the entire "buy commodity" spec mentality. New fundamental news is limited. The bigger picture fundamental backdrop is likely to remain bearish. Short-term strength needs to be measured against longer-term downside potential and be viewed as legitimate and warranted pricing opportunities for producers.
In summary, we are poised for a firm start to the new week and the new month, as spillover energy from last week's firming price action tone is the foundation. The US Dollar appears poised for a multi-week weakening period, which should support grains and general "buy commodity" mentality. While we can point to near-term fundamental storylines for some support, the reality is that the longer-term grain/soy fundamental outlook is much different than during recent spring seasons. Producers need to respect longer-term downside potential and consider the possibility that any price strength during the next 1-3 weeks may prove to produce the upper reaches of this year's price parameters.
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.
