Sunday Night Grain Outlook, 6-6-10

Monday Night Grain Outlook
By Duane Lowry
Sunday, June 6, 2010

OPENING CALL:
Corn= 1-3 higher,     Wheat= 1-3 higher,     Soybeans= 1-3 higher.

Weather will find multiple focal points and different overall spins depending upon individual trader focus. China's forecasts are more concerning today than last week. Limited recent precip and limited moisture expectations for the 6-10 day window will increase stress and concerns on up to one-third of their corn and nearly one-fifth of their soybean production. If this region doesn't soon see an improving forecast it could escalate trader concerns. The US Midwest received beneficial weekend rains in line with expectations, maintaining favorable conditions for the majority of acreage. However, rain totals were variable and many acres received less than 1/2 inch of rain. Areas short-changed during the past week will be mostly in the Plains and Delta. Much of the time temperatures in these areas will be above to much-above during the next two weeks, with the Midwest experiencing its hottest temps during the 6-10 day period. Precip during the next 10 days will be limited in the Delta and parts of the southern Midwest. The 11-15 day period will see limited precip except in the far northern Midwest. It is very possible traders can talk about favorable conditions during the next two weeks, but this will not be true about all areas. In relationship to Friday, I see the concern level about China rising and possibly enough so that it should be enough of an influence to summarize weather as bullish. I see enough dryness and heat concerns for the Plains and Delta to make it uncomfortable with some of the 165-170 national corn yield projection rhetoric touted recently. There is also increased conversations this weekend about greater prevent plant acres in parts of the eastern Midwest due to excessive moisture during much of this planting season. While not a certainty, I continue to see elevating concerns from longer-range weather forecasters, fearful that too many acres will be impacted by rising odds that July and August will present temperature and moisture stress. With China as maybe the main focus point, I see tonight's weather outlook as worthy of a bullish label.                   

News> The G-20 meetings produced a lot of statements, but no concrete moves to immediately reverse the speculators downward push on the Euro.

Wheat is oversold and specs are holding excessive short positions. Index rolling is nearing completion. The fundamental profile remains bearish, but at some point the conditions can't help but create a short-covering event. Inter-market spreads do not favor selling wheat. If my ideas that suggest row-crop weather forecasts deserve a bullish spin, China's in particular, then wheat should very quickly seek to recovery Friday's losses. Being bearish here looks like a trap to me.                               

Corn will find mixed assessments of weather. Some traders will see Friday's performance as so depressing that today's weather is not bullish enough to counter Friday's downside momentum. Since I think the China forecast is quite concerning, I think we are worthy of not only a higher start but a quickly rising interest in buying activity from multiple sectors of the trade, both short-covering and new buying. Technical conditions are significantly oversold. Trader sentiment is beyond bearish, having reached the demoralized stage last week. Some traders will see outside markets as still holding a thumb on grain markets, but I think that pressure should be nearly over and several of those markets are due for a trend reversal. Here too, the trade seems much too bearish on the 6th of June based on what I see as the overall weather outlook of both the US and China.          

Soybeans will find the same basic arguments/debates I have discussed above. Technical conditions are due for a rally phase. I can understand some longer-term downside targets based on ultimate fundamental possibilities, but it seems to me that current price weakness is overdone for not only technical reasons but give the current forecasts there should be more respect for future possibilities, as today is only June 6th.                               

In summary, there will be different opinions about weather, but I see weather concerns as rising and enough so that we should be higher tonight on weather. If outside markets could stabilize or begin a recovery process, we could very quickly recovery Friday's losses in the grain/soy markets. I expect outside market direction to reverse last week's tone early this week. Technical conditions are oversold. Overall profiles warn that conditions remain ripe for a significant short-covering event. I think being bearish here could prove to be quite a trap.         

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.