Sunday, August 29, 2010 4:03 PM

Sunday Night Grain Outlook, 8-29-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, August 29, 2010

OPENING CALL:
Corn= steady-easier,     Wheat= steady-easier,     Soybeans= steady-easier.

Weather doesn't offer anything that seems very market-moving. Russian wheat areas with rains seems to still be expanding, easing concerns about fall planting. US Midwest/Delta crops are pretty much already determined, regardless of moisture conditions here forward. Some acres will benefit from expected moisture during the next 10 days, but I hesitate to say this expected moisture is bearish, mostly because the trade won't want to see it that way anyway. Early planting and aggressive GDU (Growing Degree Unit) rates this summer have moved the crop forward at a fast pace. This fast GDU pace should not be confused with drought/stress-induced crop maturity. Very few national acres are moving to maturity at a fast pace due to problems and therefore very few acres will find detrimental implications from this year's fast pace. Yet, in the current environment many seem to think the fast approaching harvest has yield-reducing tendencies so I suppose most will say weather is bullish. As long as price action doesn’t trump their assessments, truth doesn't matter and they will continue to assume their weather is bullish and correct.                        

News> I don't see much for news. Because stocks rallied on Friday many wanted to say Bernanke's comments Friday were bullish. I think the weekend assessments were more accurate and seemed to suggest his comments were really much more benign and no immediate easing activity should be expected, or at least not enough to alter what nearly all economic data has been suggesting for a long time and that is we are really fighting deflationary signals. I don't care how much money is on the Fed's balance sheet, it is not moving through the economy.      

Wheat may find support from slow European harvest conditions/forecasts, but I struggle to find this as a legitimate storyline. Also, some have wanted to focus on this the past several days yet price action has been quite lethargic. Some may also view the Russian moisture situation/forecasts as improving and thus easing concerns about fall sowings. Technical conditions could legitimately be seen as mixed, so I suppose some will want to be bullish. However, I see the overall tone to recent price action as weak and underperforming expectations on a daily basis. My read on the technical conditions is that they warn we may be ready for another push down. So, expect some to call thing higher tonight just because market sentiment is leaning bullish as the default setting. However, I am suspicious any early strength will again lack energy and the overall conditions warn of still price eroding themes in the weeks ahead. Personally, I don't think we have any reason to be higher tonight, but that doesn't mean we won't be.                                 

Corn will find mixed expectations. The trade was littered with talk of disappointing yields and I fully expect the trade to re-circulate that storyline again, causing some to expect higher initial trade tonight. While you can find any yield report slant you wish to hear, the trade wants to be bullish and that will remain the focus. Trader sentiment remains near universally bullish and will remain so until price action forces them to consider otherwise. Technical conditions offer plenty of warning, but so far traders still don't care. I do think it is very interesting to point out that we closed 1/4 cent lower for the week last week. Not that this 1/4 cent reversal is any big deal, for it is not, but in relationship to all the bullish sentiment and trader certainty the crop is getting smaller and some fear by a large amount, why weren't we up more significantly, or at least up for the week?              

Soybeans will find many willing to expect more strength this week, just because of general trader sentiment. There is no news. Most all boots on the ground are very optimistic about national yield potential. Technical conditions offer plenty of warning signs to the bulls and fundamental profiles are bearish and seem quite capable of becoming more bearish as harvest unfolds. However, nobody wants to sell. Last week found steady short-covering activity and certainly more determined short-covering activity occurred Friday, but is that activity done yet? Who knows?  I don't know why we would go higher tonight/this week, but I don't think we are justified to be where we are either. Yet, this is not enough of a reason to expect weakness tonight either. Weak price action, if/when it occurs, could quickly fuel selling interest from multiple sectors of the trade for multiple types of reasons, but we are still waiting for the price action signal that begins this process.                                

In summary, most will see no reason to expect anything but the default setting, which is bullish. Personally, I view weather as neutral/negative, but the market probably won't. Personally, I see the approaching harvest as a reason to stop seeing prices work higher, but most trader sentiment views won't. Personally, I see technical conditions as very much offering warning signs, but most don't, although they will as soon as we get the first good day's setback. Maybe we open higher, but I just don't see the legitimacy behind expectations for strength tonight.                 

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.


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Sunday, August 22, 2010 4:36 PM

Sunday Night Grain Outlook, 8-22-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, August 22, 2010

OPENING CALL:
Corn= steady-easier,     Wheat= steady-easier,     Soybeans= steady-easier.

Weather provided beneficial crop finishing rains for drier portions of the eastern/southern Midwest. The two-week outlook has a generally dry theme, but most areas have now reached the point where crops are far enough along that the crop is what it is. It is August 22nd and most Midwest soil moisture profiles can finish the crop. It is too late to be discussing weather from a concerning point of view. That doesn't mean that some won't, but it means it shouldn't be embraced. Expect some to offer a bullish slant to Midwest weather. Russia/FSU wheat areas are seeing improving moisture and forecasts suggest this will continue, easing fall wheat seeding concerns.                        

News> Weekend newswires discuss the likely slowing economic growth in China during the next few years, possibly negatively impacting overall commodity trends. China real estate looms as a threat to the banking industry and the key to economic weakening. Fed's Bernanke will speak at the Fed's annual Jackson Hole Conference on Friday. Overall economic news and sentiment is slipping and can be seen in the tenor of the newswires. The New York Times posted an article that discussed small investors fleeing the stock market, withdrawing $33 bil from stock mutual funds during the first 7 months of this year. This would be the fastest pace drawdown since the 1980s. When viewed from the perspective of what would be a normal inflow of money into stocks, the current trend represents a signif      

Wheat will likely see trade on both sides tonight, maybe initially weaker on expected knee-jerk reactions in the row-crops to Pro Farmer's national production estimates. Some will point to improving moisture prospects in Russia/FSU and diminishing fears about fall wheat seeding. Others will point to slow arrivals of this expected improving moisture trends. Short-term technical indicators are mixed signals, but lean towards expecting selling interest to build on minor strength. Overall fundamental/technical conditions seem to argue for further price erosion during the next several weeks.                                 

Corn will find traders expecting some initial weakness on weekend rains in the eastern/southern Midwest and reactions to a larger national production estimate from Pro Farmer than expected because of daily tour comments. However, it has been relatively common for the final national yield projection to seem disconnected from daily tour rhetoric. And it is also common for Pro Farmer to underestimate final USDA yield projections. Short-term technical indicators offer mixed signals. Trader sentiment will remain near universally bullish and still expecting a probe above recent highs probably sometime early this week and maybe tonight. Traders also expect Monday afternoon crop ratings to show a decline. Bullish trader sentiment is based on two main factors: 1) USDA's last yield estimate of 165 is too high, and 2) USDA's demand projections are too low by 200-350 mil bushels due to export increases as a fallout of the Russian crop declines. Personally, I believe the final US corn production can be higher than 165 and I believe US corn export optimism is unlikely to materialize. Technical conditions warn of vulnerability, which suggests that any probe of recent highs may prove unsustainable as the week evolves. Look for selling opportunities.              

Soybeans will start lower in reaction to a surprisingly high Pro Farmer national yield estimate. If strength in corn materializes tonight/tomorrow, soybeans may reject early week bearishness since we are already more than 40 cents off last week's highs. Short-term technical indicators may allow for some minor price recovery, but selling interest should build above the market and limit any rally potential. Overall fundamental conditions have been and remain bearish. Technical conditions have rolled over to favor a bearish stance. Trader sentiment has been unwilling to be short soybeans despite all this and as long as corn is perceived as being bullish, traders will continue to shun any temptation to be bearish soybeans. Yet, this does not prevent downside energy from unfolding, as proven by last week's price action. Weekend rains offer very beneficial crop-finishing moisture to parts of the southern and eastern Midwest. Harvest is rapidly approaching. Downside potential during the next few months remains very significant.                                 

In summary, there will be some knee-jerk bearish reactions to the Pro Farmer national production estimates. However, corn bulls will be largely unfazed and will remain committed to the bull side until harvest data forces them to reassess or technical conditions falter and they begin to see equity drawdown that require them to reassess. Search any me-too soybean attempts to recovery part of last week's price declines for selling opportunities and be concerned about downside potential during the next few months. While I don't see weather as bullish and I believe we are too far down the calendar road with mostly acceptable soil moisture profiles to finish the 2010 crop, some/many will still want to talk weather and those folks will point to the dry theme of the next two weeks as being a concern. So, all markets can certainly see some attempt at upside probing tonight/tomorrow, but I want to search that strength for selling opportunities, especially in soybeans. Corn is walking a fine line between a confirmed bullish storyline and an overly-hyped bullish tone based on yield and demand possibilities that ultimately fail to materialize. Also, whether it is immediately a factor or not I don't know, but overall economic conditions are concerning and may point to deflationary forces/concerns unfolding in the months to come. If true, this is not supportive to commodities in general and current values of most commodities are inflated because of inflationary expectations that have been propping up speculative commodity investments for months. It feels to me as if we won't need too many more deflationary signs to begin liquidation trends in many commodities, which if true, isn't bullish the grain trade. Bulls have one hope that all their potential rests and that is corn, which as I have said is a fine line and not a certainty.                 

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.


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Sunday, August 15, 2010 2:41 PM

Sunday Night Grain Outlook, 8-15-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, August 15, 2010

OPENING CALL:
Corn= 1-3 lower,     Wheat= 3-5 lower,     Soybeans= 3-5 lower.

Weather provided better than expected coverage and precip totals for the Midwest and Delta during the weekend. The forecast remains generally favorable/non-threatening through the next two weeks for most areas. Russia's forecasts offer cooler temps and better precip opportunities for many areas.                       

News>.   

Wheat will start lower on follow-through to Friday's weak performance. Cooler and wetter forecast for much of Russia/FSU areas of concern will also weigh on trader sentiment. I doubt if it improves production potential, but it will help to scale-back fears related to fall planting possibilities. Technical conditions warn of downside vulnerability. Fundamental conditions warn current prices are still inflated with speculative activity and well above a more reasonable/warranted level given overall global wheat stocks.                                 

Corn will start lower on better than expected weekend precip and generally favorable/non-threatening US weather expectations for the vast majority of acres. Friday's Commitment-of-Traders data also showed the spec has bought more corn than expected, suggesting we may be much farther down the maturity road with this bull run than current rhetoric suggests. Technical conditions warn of notable downside vulnerability. A record harvest season is not too far away. Anecdotal reports from the country continue to suggest higher final production figures are possible. Many producers are facing tremendous profit opportunities at a time in the growing season when the crop is largely known. This is the definition of a good selling opportunity.              

Soybeans will start lower on ideas Friday's strength was exaggerated with short-chasing activity, along with expected weakness in corn and wheat. Better than expected rains should also weigh on values. Fundamental profiles are not bullish. Technical profiles warn of notable downside vulnerability. A record harvest is just ahead.                                 

In summary, post-report Johnny-come-lately buying activities should have culminated last week, along with short-chasing activity. Technical conditions warn of downside vulnerability. Expect approaching seasonal harvest factors to weigh on price trends, challenging recent buyers and likely building selling pressures in the weeks ahead. I write all this and expect a lower start tonight, but the trade is universally bullish and the tendency on Sunday night has been to be a reflection of trader sentiment. So, I certainly rule out some attempt to probe into positive territory, but any attempt at strength early this week, if it occurs, should be viewed with great skepticism.               

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.
© 2010 Duane Lowry. All Rights Reserved.


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Sunday, August 01, 2010 1:53 PM

Sunday Night Grain Outlook, 8-1-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, August 1, 2010

OPENING CALL:
Corn= 1-3 lower,     Wheat= steady-easier,     Soybeans= 2-4 lower.

Weather will provide favorable/non-threatening conditions during the next two weeks for the US Midwest. Parts of the Delta prefer more moisture. Russian areas suffering from extreme heat and dryness have little precip opportunities in the two-week outlook, but temperatures are set to cool by next weekend. Russia's weather outlook will be seen as not offering any beneficial change.                       

News> Egypt bought 3 cargoes of Russian wheat. (It seems strange that Russia would be offering wheat for export right now. It seems even stranger that they would allow it out the door at roughly $20 cheaper than the wheat offered from other origins.) Rumors exist that Argentina may consider ending/lowering its grain/soy export taxes after August 24th, but this seems highly unlikely and not before a drawn out fight. Argentina currently imposes a 23% tax on wheat, 20% on corn and 35% on soybeans.   

Wheat will open at 6:00 Chicago time. Beyond that, most everything else is a guess, but hopefully an educated guess. The Russian weather storyline will remain the same as last week, as there is basically no relief in sight for key areas of the central, southern and Volga districts. However, roughly 60% of the countries spring wheat is grown east of these regions and have not suffered the same fate. The real question here is when does the market reach the point where worst-case scenarios have been factored in. Nobody knows. Have we reached the point where production loss projections have been overstated? Nobody knows. The trade really won't have a current benchmark on the situation until USDA offers their latest assessment August 12th. Yet it may be equally important to recognize clear historical patterns in weather markets and the potential for the bull markets to end before the weather forecasts themselves suggest an end is warranted. Considering world and US carryout levels, the Russian problems are occurring at a time when the world is best capable of handling the abrupt development and change in world carryout projections. This leads me to conclude that the trade/market will reach a point where it does significantly overreact, but whether that is now or not leads us back to the same basic answer. Nobody knows. However, it is important to recognize global supply statistics and an assessment of where Russia's crops are grown and that not all crops are impacted by the current drought, will lead to a conclusion that the problem is very workable from a global perspective. This leads me to believe that current prices are ultimately unsustainable and during the majority of time during the next 6 months Chicago futures prices will be at price levels below current values, but we are still looking for that elusive culminating price spike. There is plenty of fundamental rationale that suggests this entire situation is exceeding fundamental price justification, but who knows when the emotional spike will end. It is also important to know that new-crop wheat futures have reached levels that will expand both US and global wheat acreage. Yet, maybe the bottom line is that the public is still willing to fan the flames on this storyline. One last thing needs to be mentioned and may have an impact on early sentiment tonight and that is Egypt's weekend purchase of 3 cargoes of Russian wheat at prices still deeply discounted to other world origin values. Why? Why would Russia sell wheat and sell it at cheaper values? What should we conclude from this in terms of the overall scope of the problem? Should we conclude that the exporters who are holding this inventory now designated to Egypt question whether domestic Russian prices will ever get high enough to make that inventory more valuable inside Russia, or were they just fearful of getting caught holding those supplies when an export ban is announced? Are we to conclude that the exporters holding that supply see the wheat/feed grain situation of Russia in its entirety and determined Russian wheat supplies were still worthy of a sharp discount to other origins? There is a lot that doesn't make sense here, which may argue that current futures prices have already exceeded justified levels.                                

Corn will likely be most influenced by wheat price action. US corn production ideas are on the rise. As the crop progresses, anecdotal reports from the country are clearly increasing confidence that the corn crop will be better than recently expected and quite probably better than last year. If/when the wheat market decides enough is enough; the corn market will find supply factors overshadowing any possible increase in exports due to changes in global feed supplies. If there is a bullish storyline for corn, it won't be the 2010/11 balance sheet, but will instead be the potential for an acreage battle storyline to develop. Ultimately, this will suggest the least bearish aspect/most bullish aspect of the corn market will involve the 2011 crop. Let's recap the 2010 growing season for a moment. The US corn crop was off to an early and exceptional start in most key areas. Great uniformity was seen and production potential was high. Then we had areas that suffered from excessive moisture and created elevated yield vulnerability. The greatest risk in these areas was from a sudden end to moisture and root masses that couldn't handle drought conditions well. However, that didn't happen and those areas most impacted by excessive moisture received the best possible follow-up weather patterns and therefore avoided the loss of production potential to the degree feared. As for those areas not impacted by excessive moisture, most acres are poised for record production under optimum temperature/moisture combinations. It is very possible that US national yields are able to climb far enough above current ideas to more than offset any expected possible increase in export demand due to the Russian problems.  While not popular amid the elevated emotional environment, I see significant downside potential in corn from current price levels.              

Soybeans don't have an independent storyline for sustaining current price levels. Current US production ideas will prove to be far too conservative and carryout projections will ultimately build from current plentiful levels, despite solid Chinese import expectations. Technical conditions warn that Friday's upside breakout will lack the ability to generate sustainable follow-through. Ultimate downside potential to harvest lows is very significant from current levels.                                 

In summary, wheat will be the trade's primary focus. Friday's late surge in all three markets doesn't seem justified and could easily allow for all markets to open lower. Egypt's purchase of Russian wheat could also be seen as a reality check and therefore lead some to believe current wheat future prices have exceeded fundamental merit. Generally benign US weather forecasts amid elevating US production ideas could easily prompt a lower sentiment towards corn and soybeans. However, it appears everything will initially hinge on how much emotional buying interest exists in wheat. Personally, I think last week's price action offered many culminating aspects and we should see prices turn downward this week, allowing for an increased focus on elevating US production ideas.              

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.


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Sunday, July 25, 2010 4:27 PM

Sunday Night Grain Outlook, 7-25-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, July 25, 2010

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

Weather provided beneficial rains to parts of the eastern Midwest, with more beneficial rains seen this week. The Delta will also see widespread favorable rains this week. Parts of the western Midwest experienced excessive rains that caused flash flooding. Some spots will experience brief periods of excessive heat, but the overall temperature outlook during the next two weeks should pose little threat to national yield potential. Weather will find mixed spins, with some focusing on expected improvement in parts of the eastern Midwest and Delta, while others will attempt to draw focus to areas that experienced excessive weekend rains and the overall wetter-than-normal June and July and possible negative implications to yield.                       

News>  

Wheat will find mixed expectations, after Friday's emotional bullish focus on Russian weather/production concerns failed to produce upside price energy. Short-term technical conditions are vulnerable, but few seem willing to trade this market from the short side. While looking for a very significant top to form soon, I am suspicious this market has desires to probe above recent highs. Consequently, any early week weakness, if it occurs, could prove to be a bear trap as the week evolves. Expect bullish fodder related to Russian crop problems to continue surfacing early this week.                                

Corn will find mixed expectations. Some will see weekend rains and the two-week outlook as being bearish. Others will point to excessive moisture problems, both weekend flooding and possible negative implications from an overall excessive moisture pattern in some areas for much of the past two months. Bulls have tried multiple storylines during the past several days to cheerlead a cause for higher prices, but as of Friday's close we are more than 25 cents off the recent highs and many of the past several days have produced disappointing performances in relationship to bulls' expectations. In fact, Friday was the lowest close since July 6th, trapping many emotional buyers with losing positions. Overall, I would label weather as bearish, but I understand that it is not unreasonable to point to bullish aspects related to excessive moisture. While we seem vulnerable to weakness, I don't think there are many that want to sell this market at this time and I wonder if the bulls won't make another attempt to prop up prices this week. Consequently, early weakness tonight may prove to be a bear trap? That said, I think there is very legitimate merit in viewing price strength this week into the $3.95-4.00 area as a legitimate selling opportunity.           

Soybeans will face the same mixed weather interpretations. This market does have some shorts involved and recent price action has been reluctant to break. Any early week weakness may be an opportunity to trap bears. While I am looking for a major top in this time/price zone, I am suspicious the trade will attempt an upside probe above recent highs and chase shorts before prices ultimately head to lower levels, possibly significantly lower levels.                                 

In summary, expect mixed and uncertain pre-opening rhetoric. Bulls and bears both have weather arguments, with the bulls the most vocal. Short-term technical indicators offer mixed signals. Longer-term indicators warn of potential for significant tops to be made in the very near future, if they have not yet been established. Yet, I am suspicious the bulls will appear to have the upper hand early this week and it wouldn't surprise me if early week weakness, if it occurs, could prove to be a bear trap. Look for selling opportunities on strength this week, but I don't think selling early week weakness seems very attractive.             

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.


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