Early Grain Outlook, 5-9-12

Effective Date: 5/9/2012

by Duane Lowry
Wednesday, May 9, 2012

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

*At 6:58 am> Night session results: Corn= 2 1/4 lower,     Wheat= 2 1/2 lower,     Soybeans= 10 1/2 lower.

*TOMORROW, USDA will issue its monthly S&D report, with this year's first look at the 2012-13 marketing season.

*Here are average trade guesses:
2011/12 Ending Stocks>
Corn= 758 mil avg, range= 660-801, April USDA= 801.
Soybeans= 221 mil avg, range= 200-250, April USDA= 250.
Wheat= 781 mil avg, range= 756-800, April USDA= 793.
2012/13 Ending Stocks>
Corn= 1.704 mil avg, range= 1.209-2.072.
Soybeans= 170 mil avg, range= 100-250.
Wheat= 805 mil avg, range= 609-963.
South American Production>
Argentine Corn= 20.7 mmt avg, range= 19.0-22.0 mmt, April USDA= 21.5 mmt, Last Year= 23.8 mmt.
Arg Soy=42.0 avg, range= 40-43, April USDA= 45 mmt, Last Year= 49 mmt.
Brazil Corn= 62.7 avg, range= 61.0-66.0, April USDA= 65.0-66.0 mmt, Last Year= 57.5 mmt.
Brazil Bean= 65.5 avg, range= 65.0-66.0, April USDA= 66 mmt, Last Year= 75.5 mmt.

Weather conditions/forecasts remain favorable.                

Wheat will lean lower on overnight weakness. Yesterday's recovery failed at the beginning of expected resistance levels. Further upside probe attempts above yesterday's highs will find increasing selling interest from multiple sectors of the trade. Global supply storylines remain bearish and the new-crop harvest season is not that far away and expected to be 2-4 weeks earlier than normal. Overall conditions suggest upside tests of resistance should be searched for longer-term selling opportunities, as trending lower values into harvest remain a reasonable expectation.                           

Corn will start lean easier on heavy market tone this morning, largely fueled by notable weakness in soybeans during the past few sessions and weak outside market tone. Cash basis also shows signs of weakness. Traders fear bearish new-crop data from USDA on Thursday, but has so far been unwilling to consider the short side of the corn market. Once we get past tomorrow's report, we may see increased selling energy surfacing from multiple sectors of the trade.                                                             

Soybeans are suffering from very weak performances during the past few days and it continued with overnight weakness. Outside market weakness and cash basis weakening helped weigh on overnight values. July soybeans have fallen 88 cents during the past six trading sessions. November soybeans are nearly 70 cents off their early April post-acreage report price peak. Traders expect bullish-looking data from USDA tomorrow morning. Post-report strength will find tech-based selling energy build 30 cents above the overnight values. Expect to find increased producer selling surface on strength as well, as they recognize profits are under attack. Many producers have little new-crop corn price protection and are not comfortable selling corn at sub-$5 levels. This may translate into a more protective approach to soybeans on price recovery efforts?                                                  

In summary, there is a very heavy tone of discouragement and fear developing in commodity markets. Ag traders are hopeful of bullish data from USDA tomorrow for soybeans and they hope this will produce some strength in corn and wheat as well, on ideas/hope that bearish wheat and corn data has been fully expected. We appear to have a situation here where selling interest may build quickly after tomorrow's report from multiple sectors of the trade. The weight of nearly perfect early season weather in nearly all areas of production, especially amid an overall weakening sentiment in commodity world, may prove to be the overriding factor into the end of June. At 6:58 this morning: Crude was down $0.51, Gold was down $16.90, Dow Index was down 70 and the US $ was up 25.

CORN:
Barge Values: May= +83 N
CN: Support= 5.85,   Resistance= 6.30-35
CZ: Support= 5.10,    Resistance= 5.30-35

**PROFILE: July Corn> Dec Corn> Test of resistance occurred with yesterday's recovery rally effort. Further strength potential above yesterday's highs should be very limited. Overall conditions point to trending lower values in the weeks ahead. Downside potential in Dec is very significant.                  

SOYBEANS:
Barge Values: May= +61 N
SN: Support= 14.20-25, Resistance= 14.60
SX: Support= 13.00, Resistance= 13.60-75
SMN: Support= 400, Resistance= 425
BON: Support= 53.00, Resistance= 55.00

**PROFILE: July Soybeans> Nov Soybeans> Price action this week has been very weak and greatly underperformed popular expectations of pre-report performance. Expect selling interest to build on any post-report strength attempts. Overall conditions warn of greater downside risk in the weeks ahead. IN SUMMARY, search short-term rally attempts for selling opportunities.        

WHEAT:
Barge SRW Values: May= +52 N
WN: Support= 5.95, Resistance= 6.20-30

**PROFILE: Chicago July Wheat> Short-term recovery potential above yesterday's highs is likely to be limited. Overall conditions warn of trending lower values in the weeks ahead.      

GLOBAL HIGHLIGHTS & HEADLINES: Food ministry officials say India's food grain stocks have built to 71.1 mmt as of May, more than times its buffer requirement. Sen. Richard Lugar lost his Indiana GOP primary to a tea party backed candidate. Lugar was seen as losing for having attempted to work with Democrats too often and a victim of an anti-incumbency sentiment.

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.