Sunday Night Grain Outlook, 6-13-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, June 13, 2010

OPENING CALL:
Corn= mixed,     Wheat= mixed,     Soybeans= mixed.

Weather will produce normal-above temps in most areas during the next two weeks. Precip will favor central and eastern areas during the next 5 days, the north during the 6-10 day window and more limited and favoring the east during the 11-15 day period. Few concerns will be seen for the US Midwest. The US Delta will have some areas experience stress during the next two weeks, possibly affecting up to one-third of the corn acres. Canadian weather remains on track to sharply reduce planted acreage due to excessive moisture. China continues to have areas of the North China Plains that will cause stress. This hasn't been widely embraced by traders, but Friday's price action may cause a greater level of respect for Chinese concerns.                   

News> Three central China government agencies said today they are undergoing an inspection of the government grain reserve levels and pricing methods in an effort to ensure stable supply and effective grain supply management. A report will be due by July 25th to one of China's top economic policymaking bodies. President Obama has told BP that he wants them to establish an escrow account to pay damage claims, with an independent panel to administer payments. Congressional leaders received a letter from President Obama Saturday asking them to approve $50 bil in emergency spending to avoid layoffs of public workers, such as teachers, police and fire workers. A European Central Bank official says the market is too negative about Greece, citing measures that have been taken Greece data that shows government revenue is up 8% and spending is down 10% during the first 5 months of this year, showing Greece is on the right track.

Wheat may see trade on both sides, with Friday's price action providing a stabilizing tone. Technical conditions should encourage buying interest on breaks, with limited trading willingness to sell if values were to approach last week's low. New news is limited, but maybe the key here should be that the long-standing bearish storylines are extremely old and stale. Inter-market spread relationships do not favor selling wheat and could possibly generate new buying interest in wheat. With large specs carrying record size bearish positions, short-covering activity could easily find a way to escalate during the next few weeks. Weakness this week needs to be seen as a buying opportunity.                                

Corn will find mixed expectations. Weather watchers will lean towards suggesting there was no reason for Friday's strength and the generally favorable Midwest weather theme for the next two weeks is justification to start weaker. Technical-based traders will be encouraged by price strength late last week, but not necessarily very trustful of its ability to be sustained. We probably have a situation where increasing buying interest will be found on weakness, but they it will tend to exist much more closely to the area of last week's lows. China dryness concerns do exist, but they have existed for some time with limited trader embrace. It will be interesting to see if last week's price action causes a heightened awareness of Chinese dryness concerns. Bears will point to the very favorable crop ratings and the June 30th acreage report's potential to find additional corn acres as more than offsetting last week's USDA upward revisions of ethanol usage demand. Overall conditions argue for diminishing willingness to sell weakness at this time and much more upside potential than traders have been willing to discuss, if we begin to find new twists, as traders may have already dialed in best-case yield scenarios. Any test of last week's lows needs to be seen as a buying opportunity.          

Soybeans will likely see trade on both sides. Favorable US weather will fuel the bears, China weather and Friday's price action will fuel the bulls.                                

In summary, we may see trade on both sides, but the key here is that buying will surface above last week's lows. We have found the cheap enough levels. Traders have already discounted best-case scenarios, if any meaningful concerns develop upside potential is much greater than expected.         

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.