Sunday, March 07, 2010 2:50 PM

Sunday Night Grain Outlook, 3-7-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, March 7, 2010

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

Weather will provide warming temps in the US Midwest during the next 10 days, with ample moisture during the next 5 days.             

News> The chairman of China's primary grain trading company, COFCO, says global and domestic soybean prices are currently low and are unlikely to fall very much this year despite expectations of rising carryout levels due to record South American harvests. China's exports fell 16% last year.   

Wheat may lean easier on Friday's soft performance and lack of news, as traders prepare for Wednesday's USDA reports. However, short-term technical indicators do not seem conducive to encouraging new selling activity. Outside market tone will be the dominant influence tonight, with technical conditions quite capable of encouraging some short-covering activity.                             

Corn will also lean easier on Friday's week tone. However, any "sell-stops" were likely triggered by Friday's close. Trader sentiment seems mixed and skittish, easily influenced by the direction of the last tick. Long-term bears exist, but not as much as say 6 weeks ago. Bulls seem to believe the bearish rhetoric has been factored in and it is time for some spring seasonal "what if" price premiums to build. Traders seem more worried about bullish surprises in Wednesday's report and/or the acreage data on March 31st than about bearish surprises. Technical conditions are wounded after last week's trade, but lack any clear indication that would suggest the spring time peak has already been scored. I don't believe the spring time high has yet been established and I don't believe early week weakness will be able to build momentum or sustainability. Weather doesn't yet appear to provide clear influence to the trade, but it is nearing the top of the list for "after the fact" explanations of the day's price direction.       

Soybeans will lean easier on sort of "just-because" longer-term fundamental focused reasons. Short-term technical indicators are mixed, but could quickly encourage buying interest if given some supportive encouragement from outside market developments. Most traders are bearish, with arguments about timing more so than merit. It "feels" like we could easily trap some shorts and generate a short-chasing event.                                      

In summary, most will expect weaker markets tonight on last week's price action and I understand the logic for that. However, it has been a trap to sell weakness for several weeks and my sense is that pattern will continue. Overall longer-term conditions suggest downside vulnerability, but we have a long time for that to evolve and we may have too many bears at this time. I think prices in all markets can firm as the week evolves, possibly seeing wheat, corn and soybeans all challenge recent highs at some point during the next couple of weeks. Yet, part of this opinion is driven by my belief that gold and crude both have desires for more upside progression, suggesting it may be easy to encourage some "buy commodity" mentality that can lift the grain trade as well. Plus, right or wrong, bears are more nervous than bulls about the March 31st acreage data and we have more bears than bulls at the present 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.
© 2010 Duane Lowry. All Rights Reserved.

 


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Monday, March 01, 2010 2:19 PM

Sunday Night Grain Outlook, 2-28-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, February 28, 2010

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

Weather will continue to keep northern Brazilian soybean harvest slowed during the next 10 days, but concerns are limited. The US Midwest will experience a wet 6-10 day period, but warming temps this week will be welcomed.             

News> A bailout financing plan for Germany emerged during the weekend, involving German and French entities. Some believe the deal could be completed by Friday and will involve 30 billion euros. France's Finance Minister Christine Lagarde said this morning, "I have no doubts that Greece will succeed in refinancing itself through ways that we are exploring at the moment." Iraq bought 380 tmt of Russian and Canadian wheat. Chile is the world's number producer of copper and this weekend's earthquake will cause at least temporary disruptions to the supply channels.   

Wheat will start higher on firm price action that managed to produce nearly the highest close in 1 1/2 months and amid ideas we are poised to trigger additional short-covering activities. New news is limited and the fundamental backdrop is and will remain bearish. However, this is all known and we have still managed to trap the spec community with excessive short positions. Wheat has a history of similar situations creating strange and difficult to explain price rallies.                             

Corn will start higher on firm price action and continued short-chasing activity after posting the highest closing value Friday that has been seen in the last 1 1/2 months. Some will also expect the new month to bring new speculative investment buying energy. The US Dollar is likely to be weaker after weekend developments suggest a debt solution for Greece is being worked out by France and Germany, with strong hopes of a final package announcement by the end of the week. Spring fieldwork delay anxiety has been percolating for several days and the turn of the calendar may bring that discussion more energy, especially since price action is firm and will be quick to embrace any bullish storyline. Some bullishness is also focused on the March 9th USDA S&D report, when they will also release results of the "resurvey" of corn's final harvested acreage and any production adjustments. Technical conditions remain supportive and I wouldn't want to rule out another 20 cents of upside potential. However, producers need to view additional strength as selling opportunities, believing that background fundamental foundations are worthy of creating a price ceiling this spring and possibly during the summer as well.       

Soybeans will start higher on a firm price action theme and expectations the US Dollar will experience a weak tone this week, which will likely buoy the entire "buy commodity" spec mentality. New fundamental news is limited. The bigger picture fundamental backdrop is likely to remain bearish. Short-term strength needs to be measured against longer-term downside potential and be viewed as legitimate and warranted pricing opportunities for producers.                                      

In summary, we are poised for a firm start to the new week and the new month, as spillover energy from last week's firming price action tone is the foundation. The US Dollar appears poised for a multi-week weakening period, which should support grains and general "buy commodity" mentality. While we can point to near-term fundamental storylines for some support, the reality is that the longer-term grain/soy fundamental outlook is much different than during recent spring seasons. Producers need to respect longer-term downside potential and consider the possibility that any price strength during the next 1-3 weeks may prove to produce the upper reaches of this year's price parameters.                          

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, February 21, 2010 5:12 PM

Sunday Night Grain Outlook, 2-21-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, February 21, 2010

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

Weather provides mostly favorable weather for Argentina. Some harvest slowing will occur in Brazil.             

News> Argentine officials say excessive rains caused flooding in some areas last week, with Roque Saenz Pena district in southern Cordoba reporting 74,000 acres completely ruined. India officials suggest they may export up to 2.5 mmt wheat from June forward.

Wheat will be supported on Friday's price action being better than most expected. Fundamental news is and will remain bearish, but is also fully known. Technical conditions will continue to encourage buying interest on weakness. The spec remains excessively short this market. We appear well poised for short-covering activities to increase into the end of the month. Friday's reversal-up action could be the triggering mechanism.                            

Corn has little news to focus upon. Trader sentiment remains mostly bearish, but the timing of this sentiment is changing. We also have sectors of the trade willing to add "what if" premium to current values as we address acreage mix ideas and a lot of Midwest snow and potential implications on spring fieldwork activity. February is always expected to be a weak month. Many bears could be found in January and early February preparing for just such an event. Yet, overall price action has not been as weak as bears expected. Friday's price action sets the stage for notable short-covering energy to unfold during the next several days.     

Soybeans will also find support from the general theme that short-covering energy may evolve into the end of the month. Traders will also ponder China's return from holiday and the potential this could mean buying activity. South American supplies usually seem to arrive onto the world stage slower than we all expect every year, and rain-related delays may help to produce the same situation again this year. Technical conditions seem favorable. Expect a probe above recent highs during the next several days. Longer-term bearish fundamental profiles will remain and strength during the next couple of weeks should be seen as selling opportunities for multiple sectors of the trade.                                     

In summary, Friday's action in many markets will encourage short-covering activity and technical conditions suggest this could create some "feed on itself" activity during the next several days. As people begin to more fully understand the proper evaluation of last week's move by the Fed, I wonder if the investment world may be more willing to embrace "inflation-based" investment strategies for a while, sensing the Fed will keep business/consumer interest rates low for quite some time and may in fact may have a desire for a little inflation to develop before raising rates. This sets the stage for a bit more extension to the recent gold price recovery and probably suggests it is time for the US Dollar to experience a price weakening correction of recent gains. Such an event could last a few weeks. All this coincides with a trade that may be guilty of holding a bearish sentiment for too long in expectation of a February break. With February nearing the end and overall price action better than most expected during the past few weeks, we have the right combination of factors to promote a price rally in corn, wheat and soybeans. Longer-term fundamental merit for a bearish stance strongly warns producers to view such a rally event as a pricing/hedging opportunity.                          

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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Monday, February 15, 2010 11:40 AM

Monday Night Grain Outlook, 2-15-10

Sunday Night Grain Outlook
By Duane Lowry
Monday, February 15, 2010

OPENING CALL:
Corn= 1-2 higher,     Wheat= 1-2 higher,     Soybeans= 2-3 higher.

Weather provided favorable weekend rains for Argentina. Frequent showers will keep Brazilian soybean harvest activity slow.             

News> Chinese futures markets are closed this week due to the Lunar New Year holiday. Weekend Greece developments lacked clear conclusion, but appeared to be moving in the right direction. Help appears likely, but pressure is being applied to Greece to show action on their end before a detailed plan of help is offered. Interesting to note that weekend news wires reported Goldman-Sachs was involved in Greece, creating for them an extremely complex derivatives package, with details of its impact on the Greece financial problems not clear.

Wheat should find good tech buying surface early, limiting any weakness potential and possibly/probably generating strength immediately. New news is limited. This market is poised to soon find more aggressive short-covering activity. There is a resurrecting storyline that wants to buy commodities again, with gold up $11 as of this writing from Friday's finish we may see this attitude elevate.                            

Corn should also find tech-based buying enthusiasm surface this week, limiting any ability to build downside momentum. Overall performance the past several days has exceeded popular expectations multiple times and after weeks of building bearish sentiment, we may be on the verge of a more aggressive short-covering atmosphere. Just to offer perspective, a mere 10-cent gain from Friday's levels would equate to the highest values seen in the last month. The trade is also beginning to shift greater attention towards acreage discussions, with some suggesting a firm tone may be warranted to achieve the desired 3 mil acre increase from last year. Some are also anxiously awaiting USDA's March "resurvey", pondering potential for a reduction in final 2009 production. Still others are focused on low test weight/poor quality influences and ponder the idea livestock feeders will require more volume to accomplish the same results. All these storylines and technical indicators seem set to converge to fuel short-covering activity this week.      

Soybeans will find support from technical sectors, along with some fundamentalists focused on continued slow Brazilian harvest expectations due to frequent moisture systems. Price action has performed better than most expected on several occasions during the past several days, setting the stage for a more aggressive short-covering phase, as we are nearing the highest values of the past 3 weeks despite increasing bearishness from multiple market sectors during the past few weeks. Longer-term resistance exists in layers above the market, but the next zone appears to be approximately 15 cents above Friday's finish.                                    

In summary, with China absent on a weeklong holiday, most markets will lean towards technical conditions for direction. The Greece situation's peak fear level appears to have been attained last week, allowing commodities to recover some support. Grain price action the past several days has been quite resilient and able to reject periods of price fears associated with outside markets. Technical conditions have been suggesting more upside potential. We also can find resurrecting enthusiasm to "buy commodities", as gold continues to lead a corrective recovery. It looks to me that we could experience a more aggressive short-covering event this week in many markets.                          

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, February 07, 2010 5:02 PM

Sunday Night Grain Outlook, 2-7-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, February 7, 2010

OPENING CALL:
Corn= 1-2 higher,     Wheat= 2-3 higher,     Soybeans= 4-6 higher.

Weather is similar to Friday's overall theme, providing favorable weather for most of Argentina and Brazil.             

News> EU officials say Greece is taking steps in the right direction and the problem will be solved. G-7 officials agree that banks must help to pay the costs caused by financial and economic troubles. US Defense Secretary says US and allies are not close to any agreement with Iran regarding nuclear ambitions. The G-7 meeting discussed whether the IMF or the EU should help Greece most, with most suggesting the EU would be the best fit. Japanese officials expressed concerns about "bubble" characteristics of the Chinese economy. G-7 officials also indicated market reactions to Greek concerns, as well as other European concerns have been exaggerated. Geithner says the economic recovery appears to be unfolding quicker and stronger than expected. Overall weekend news/developments/spin would seem to ease concerns about Greece from last week's hysteria.

Wheat will start higher on expected support from outside market tone. Technical conditions remain poised for a notable short-covering/chasing event. The spec community is holding a very large wheat short position, increasing in Friday's C-O-T report to 66,000 contracts, up nearly another 10%! Spring wheat acreage decisions are just around the corn and traders/producers looking at crop insurance levels may find as many acres as possible shifting away from wheat. After reversal-up action Thursday, Friday's inside day lower close may also be seen as stabilizing.                           

Corn will start higher on expected support from outside markets and overall stabilizing theme experienced last week. Technical conditions are poised for a notable short-covering event.      

Soybeans will start higher on supportive outside markets and generally positive price action of the past few days and last week in total. Traders are also preparing for supportive old-crop carryout expectations to be released Tuesday from USDA. Technical conditions are poised for a rally phase.                                   

In summary, outside markets should provide support. Overall price action last week seemed quite stabilizing. Technical conditions are poised for strength. Expect a firm tone 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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