Sunday Night Grain Outlook, 7-18-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, July 18, 2010

OPENING CALL:
Corn= 4-6 lower,     Wheat= 3-5 lower,     Soybeans= 6-8 lower.

Weather offers improved moisture prospects this week for the US Midwest in comparison to traders' expectations dialed in Friday. The overall forecasts warn it could take some time to resurrect US weather bullishness. Russia still has dry and bullish talking points, but the US Midwest changes should set tonight's tone.                      

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Wheat will start lower in sympathy with row-crops and fueled by short-term technical conditions that warn notable price corrective activity is possible/probable during the next few weeks. Some dryness concerns regarding Russia may provide support, but it is reasonable to consider that current prices have already outpaced any fundamental foundational support, considering the level of excessive global supplies.                                 

Corn will start lower on improved US Midwest weather forecasts. Friday's C-O-T data also warns speculators really loaded the boat with positions that could quickly turn into buyer's remorse. Technical conditions have been signaling alarms for a couple days and selling could quickly escalate from multiple sectors of the trade. Traders and producers need to both build respect that we have overall conditions conducive with signaling current price levels and calendar could have already produced the summer highs. If weather fears are reduced and remain reduced during the next few weeks we could see traders elevate production estimates again to the point where downside potential is certainly more than current rhetoric would suggest. Could downside risk ultimately prove to be lower than where this all started in late June? Even weaker values tonight could still be better producer selling opportunities than may exist for a while?          

Soybeans will start lower on weather and spec liquidation pressures that could quickly escalate on selling pressures from multiple sectors of the trade. Traders will be quick to remember that the fundamental foundations for the recent 1$ advance were always very questionable and more of the "what if" nature, as opposed to the what "is". If corn falters, soybeans really have questionable reasons to hold recent gains. Downside potential during the next several weeks could be very significant if weather fears remain distant.                                

In summary, all markets have technical conditions that warn of limited further strength potential and probability that a downturn in this timeframe and from current price levels could prove to be a very significant top. Producers need to seriously evaluate their forward sales level, their own crop conditions/production potential and determine the merit in making additional sales. Downside risk during the next 60 days for corn and soybeans could prove to be something below the lows made during June. As for tonight/this week, current price levels are inflated with a lot of emotional buying activity and last week's buyers could quickly be forced to seek the exit door. Last week's price gains exceeded fundamental developments and were mostly related to adding "what if" risk premium to prices. I am concerned we are in a price area and have the right overall conditions to ultimately label current price/time levels as significant pre-harvest price peaks.            

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.