Sunday Night Grain Outlook, 6-20-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, June 20, 2010

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

Weather continues to offer heat and dryness concerns for the Delta and far southwestern Midwest, similar to Friday's outlook. China dryness concerns are also similar to Friday, suggesting 15-20% of the corn and soy crops will experience stress during the next two weeks. Most of the Midwest desires a drier forecast than what we have, but it is debatable whether the current forecast is a problem or whether it is paving the way for exceptional production.                   

News> China surprised the world by announcing Saturday their willingness/intent to allow their currency to appreciate. The move is seen as a Chinese vote of confidence about the world economy. It should benefit equities and riskier investments. It is likely to be a boost to commodities in general, but it may have a negative influence on Gold and the US Dollar which have both recently benefited from safe haven buying activity driven by concerns about the global economy. This recent strength, especially in gold, should find liquidation selling pressures. While it will be argued that any Yuan appreciation may be slow, the move itself is an extremely confident statement about the global economic direction and suggests the Chinese see the European concerns as exaggerated. Therefore markets that have benefitted from safe-haven buying may find selling pressures soon develop.

Wheat start higher on weather-inspired buying in corn and soybeans, as well as expected favorable influences to commodities in general from China's willingness to allow their currency to increase in value.                                

Corn will start higher on weather concerns focusing on China and the southern US. China's currency move will provide a psychological boost and spec buying energy.          

Soybeans will start higher on weather concerns in China and the US, including excessive moisture concerns in parts of the central and northern Midwest. Traders are beginning to reduce final soybean acreage as well as expressing concerns about excessive moisture on the plants at this time.                                

In summary, we will be higher on weather and China, period. We have a lot of sidelined commodity equity and I wouldn't want to dismiss upside potential at this time.         

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.