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.

Sunday Night Grain Outlook, 1-31-10

Sunday, January 31, 2010

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

Weather provides favorable increasing moisture expectations for Argentina and drying forecast in Brazil to improve harvest expectations.            

News> China and US relations are under stress from a US decision to complete an arms sale to Taiwan, with China announcing trade retaliations against companies involved in the military equipment sale to China.

Wheat will start easier on weak price action amid bearish fundamental profiles, as many attempts to expect a technical-based recovery event have failed.                          

Corn will start easier on weak price action and demoralized trader attitudes.      

Soybeans will start lower on spillover bearish reactions to Friday's weak performance.                                   

In summary, the main news tonight will be increasing tensions between China and the US and possible implications to global trade. Favorable South American weather will also add to the bearish sentiment. Technical conditions remain oversold, but have been for some time with the only relief from the down trend measured in "pause time", as opposed to measurable corrective price movements. We are about to begin the important month of February, when producer insurance price protection levels will be determined. Producers have seen most of the favorable profit opportunities evaporate in the past several weeks, with fears now that insurance will do little more than offer protection at a level that is still below the cost of production for many operations. The mood is extremely bleak across an expanding cross-section of the commodity trading world. Having said all that, technical conditions are extremely oversold and trader sentiment is quite demoralized. Such situations usually signal an imminent correction event.                          

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.

Sunday Night Grain Outlook, 1-24-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, January 24, 2010

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

Weather on Friday focused on improved rain chances during the 11-15 period for Argentina. Today's forecast has that rain system arriving on days 9-10, but the expected coverage has been reduced as well as the confidence. Dryness concerns seem most focused on soybeans and mostly in central regions. The 11-15 day forecast is dry, with any precip occurring during the next 8 days to total less than 10% coverage. Based on the calendar, we certainly have time left to reduce Argentina's soybean production potential. But so far, overall conditions have been favorable. Some stress will be seen during the next 10 days due to heat and dryness, but if rains fall during the system that is expected on days 9-10, overall production concerns would remain limited enough to question any impact on the overall longer-term bearish global fundamental profiles. However, if that rain system were to disappoint, we could quickly find 40% or more of the soybean acreage beginning to shave production potential with enough calendar left to create a more notable impact. From a price discovery standpoint, you have to ask yourself if/when the price discovery process had reached a point where the bearish fundamental profile has been discounted enough "for the time being", and thus if the trade may be susceptible to short-covering activity because the weather spin now offers more of a concerning spin than any previous part of this growing season. From that perspective, it seems weather should have a bullish spin and we will see if traders begin to embrace that. It may not take much price strength to encourage a more cautiously supportive spin to weather rhetoric.            

News> Chairman of the Senate Banking Committee, Chris Dodd, and Republican Senator member of the committee, Judd Gregg, both said this weekend that they believe Bernanke will win Senate backing for a second term as Fed Chairman. Senate Republican leader Mitch McConnell also said he anticipates Bernanke to be confirmed. The White House issued a statement saying they believe Bernanke will be confirmed. After stock index weakness last week that was blamed on concerns Bernanke would not be confirmed, there appeared to be an overt effort by Washington to instill calm and certainty that Bernanke will in fact be confirmed, but not without many voicing their disgust about many items.

Wheat will find good support on any minor weakness, as overall price action the past few days has suggested "sold-out" conditions. New news is limited. After entering longer-term support last week, the short-term technical conditions should help to generate further stabilization and maybe some decent recovery efforts. Inter-market spreads also could provide some buying for wheat. While longer-term conditions may allow/suggest further eventual price erosion, maybe better selling opportunities will first unfold. Somebody else can be bearish wheat at this time.                          

Corn has little new news and will continue to operate amide a bearish fundamental backdrop. That said however, short-term technical indicators are poised for some recovery and the bearish fundamental news has reached the point where it is now fully known/embraced. The weekly commitment-of-traders data also show significant liquidation and more than most expected. We may find bottom-picking, user pricing and short-covering activity from multiple market sectors tonight/this week. Any weakness, if it occurs, should be limited and short-lived.      

Soybeans have the same basic storyline where fundamental profiles are and will remain bearish, but short-term indicators suggest selling pressures may have peaked and it is time for some recovery attempt. Argentina's weather forecast is drier and confidence in the one system that does exist for the next two weeks has been shaved from Friday. Outside market tone weighed heavily on the soy-complex late last week and much of that heavy tone came from fears Bernanke would not be re-appointed, which would fuel uncertainty/panic. The weekend was filled with attempts from both sides of the political isles to calm those fears and suggest in the end Bernanke would be approved. I look for firmness tonight/this week, as recovery efforts begin to take hold.                                   

In summary, traders have finally come to accept/embrace the bearish fundamental profile that has clearly existed for some time, but had also clearly been ignored or undiscovered by the trade in general. Consequently, it will be very difficult to find a fundamental argument that is worthy of inspiring any sort of meaningful rally event. Yet, we all know what the market is really in search of now is not a bullish fundamental argument but instead that elusive point where the "known" storyline becomes fully discounted for the time being and markets begin to stage consolidation/recovery patterns. Oversold technical indications exist. Last week's soy price action indicated signs of exhaustion selling activity. Four of the last 5 daily settlement prices in corn were in a 4-cent range. Friday's late corn weakness only revisited levels already achieved on Wednesday. The last 4 daily wheat settlement prices have been in a 3-cent range. Weather watchers must recognize limited precip expectations exist for Argentina during the next two weeks, with the one rain event found being reduced in both coverage and confidence from Friday's forecast, which may be another reason to spur short-covering activity. Yet it may be outside markets and how they react to weekend developments towards Bernanke's survival that may be the ultimate excuse for early week price action. Wheat, corn and soybeans are all due for some corrective bounce activity. Any weakness potential tonight should be limited. If outside markets provide some support, corrective grain/soy strength potential may be greater than most will consider.                          

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.

Monday Night Grain Outlook, 1-18-10

Sunday Night Grain Outlook
By Duane Lowry
Monday, January 18, 2010

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

Weather is similar to Friday, with maybe a slightly wetter short-term slant to Argentina. However, at least half of the region will see limited precip during the next ten days, with periods of extreme heat seen later this week and again during the 11-15 day period.            

News> Palm Oil futures were lower today, down 5. China soybean futures were lower, down 20.

Wheat may start lower in sympathy with Friday's weak close, but any weakness should quickly lack follow-through energy. Short-term indicators are due a decent corrective bounce. The ability to eclipse all of Friday's losses by the end of the week seems like a reasonable and yet conservative corrective target. New news is limited. Fundamental backdrops will remain bearish, but last week's USDA data has been digested and now the market will look to see if they can trap some late-arriving bears.                          

Corn has a similar situation to wheat. There is no news and the backdrop will remain bearish. However, selling pressures should have quickly accomplished some sort of short-term culmination point by Friday's close. It would have been the 3rd day margin call, in front of a long weekend and the scope of the margin calls would have been significant enough to spur loud demands from the margin clerks and panic escalation by the holder of the long position, as the equity drop was 200% of initial margin within just 4 trading sessions. Most traders aren't prepared to calmly handle that type of move without resulting in a liquidation response. Consequently, you had a litany of reasons to believe liquidation pressures were thorough and finding someone willing to establish new short positions on a 50-cent straight down decline might be difficult. We will definitely be finding sellers on rallies as a general backdrop theme for at least several weeks, but not necessarily sellers on weakness. Producers are in shock and usually that means unwilling to make sales. The tech crowd will see conditions as too oversold to make sales early this week. Expect some recovery attempt as the week evolves. Any early weakness tonight/tomorrow, if it occurs, should prove to be a short-term buying opportunity.      

Soybeans will find some willing sellers on Friday's poor close and perceptions South American weather is good enough to avoid any weather excitement, despite having some dry/hot periods ahead for some areas. Short-term technical conditions will find mixed interpretations, with some suggesting price action the past three days was only a pause and we may be ready to push lower now. This is not an unreasonable assessment, but I don't share it. I am more inclined to believe that we found soybean traders during the past three sessions that were confident to establish short positions. Yet, they are not so confident that they will avoid being chased out of positions if values are able to generate a recovery bounce that exceeds Friday's highs, which seems like a reasonable possibility at some point this week. Outside markets are positioned for some recovery efforts during the next several days that will provide support to commodities. After experiencing a $1 decline during the last 7 sessions, it is not unreasonable to consider allowing room for a 25-35 cent recovery event. Long-term outlook remains very bearish and such recovery attempts should be seen by multiple market sectors as selling opportunities.                                   

In summary, South American weather will find mixed spins, with most unwilling to see tradable concerns. Outside markets will provide some background support this week. Short-term technical indicators should discourage selling on weakness early this week and may encourage some bottom-picking activity. Hopefully we are set to generate a respectable recovery bounce during the next several days, setting up the next hedging and longer-term selling opportunities. Some weakness early this week/tonight can't be ruled out, but I think it will be limited and have little ability to build downside momentum. Many markets should have reached at least a temporary "sold-out" condition.                         

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.

Sunday Night Grain Outlook, 1-10-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, January 10, 2010

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

Weather proved cold temperature damage to parts of Illinois and Kansas wheat acreage, producing up to 20% losses on the acres affected, which will be less than 5% in terms of national potential. South American conditions/forecasts remain exceptional, with only brief periods of heat and a good mixture of moisture and dryness across all of Brazil and Argentina.           

News> Boston Federal Reserve President Rosengren says he expects home mortgage rates could increase 3/4% by spring, as the Fed ends its subsidy of the housing market by March 30th. Venezuela devalued their currency.

*Tuesday USDA will issue monthly S&D, final 2009 production and winter wheat acreage data.
*Winter Wheat Acreage estimates:
All Winter Wheat= 40.916 mil avg, range= 38.387-43.5, 2009= 43.111
Hard Red Winter= 30.414 avg, range= 28.977-31.572, 2009= 31.649
Soft Red Winter= 6.975 avg, range= 5.860-8.059, 2009= 8.309
White Winter= 3.505 avg, range= 3.20-4.50, 2009= 3.533

*2009 Corn and Soybean Production estimates:
Corn= 12.819 bil bushels avg, range= 12.50-12.996, Last Month= 12.921, 2008= 12.101
Soybeans= 3.337 avg, range= 3.219-3.420, Last Month= 3.319, 2008= 2.967
*2009 Yield estimates:
Corn= 162.5 avg, range= 160.0-164.5, Last Month= 162.9, 2008= 153.9
Soybeans= 43.4 avg, range= 40.0-44.7, Last Month= 43.3, 2008= 39.7

*2009/10 Carryout estimates:
Corn= 1.613 avg, range= 1.424-1.731, Last Month= 1.675, Last Year= 1.674
Soybeans= 237 mil avg, range= 170-329, Last Month= 255, Last Year= 138
Wheat= 905 mil avg, range= 800-955, Last Month= 900, Last Year= 657

*Quarterly Stocks estimates:
Corn= 10.663 avg, range= 10.130-11.390, Year-ago= 10.078
Soybeans= 2.411 avg, range= 2.377-2.449, Year-ago= 2.276
Wheat= 1.760 avg, range= 1.695-1.809, Year-ago= 1.422

Wheat will start lower on ideas Friday's gains were overdone and amid belief weekend cold damage was less than feared and inconsequential against an excessive supply backdrop. Pre-report positioning and short-term technical indicators will likely produce a weak bias tonight/tomorrow.                          

Corn has little for new news. Price action and pre-report positioning will produce buying interest on weakness. Once the Tuesday's report has been will released, it will be difficult to avoid "sell-the-fact" trade reactions to any "bullish" report spin.      

Soybeans will lean easier on favorable South American weather and generally weak price action of late. However, short-term indicators are oversold and some short-covering before Tuesday's reports seems like a reasonable expectation. Technical conditions will encourage some buying interest on weakness. We seem capable of trading on both sides and possibly could see a decent corrective bounce before Tuesday morning's USDA data.                                   

In summary, there is little for new news and trader sentiment is very much in a pre-report mode, with limited conviction about the report and mostly looking to downsize risk exposure. This may lead to some initial weakness, but soybeans seem poised for some short-covering activity before Tuesday's reports.                          

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.