by Duane Lowry
Friday, June 22, 2012
SUNRISE OUTLOOK OVERVIEW:
*At 6:02 am> Grain/Soy Snapshots: Corn= 11 higher, Wheat= 11 1/2 higher, Soybeans= 11 1/4 higher.
*Where are we for the WEEK? July Wheat= up 52 1/4 cents; July Corn= up 7 cents; Dec Corn= up 44 cents; July Soybeans= up 62 1/2 cents; Nov Soybeans= up 57 1/4 cents; July Soymeal= up $18.90; July Soyoil= up 137 points; Crude Oil= down $6.13; US $ Index= up 52; Gold= down $62.60; Dow Index= down 208.
Day Session Expectations vs Night Session Tone:
Dec Corn: Support= $5.55, Resistance= $5.85
*The correction event is over. We have tested the breakout area. We may have the more emotional stage of the rally just ahead of us.
Nov Soybeans: Support= $13.75-80, Resistance= $14.10
*Why can't we have an upside push to new highs today?
Sep Wheat: Support= $6.80-85, Resistance= $7.10
*Short-covering energy could quickly expand, thoroughly punishing the long corn/short wheat guys.
Outside Market Influences:
At 6:01 am> Price Snapshots: Crude was up $0.44, Gold was up $3.70, Dow Index was up 58 and the US $ was down 2.
*Crude will reject the current probe to new lows, setting the stage for a notable correction phase to unfold during the next couple of weeks.
Weather offers limited/light precip opportunities during the next several days. Carrot-on-a-stick rain chances can be found in the 6-15 day windows, but the pattern the past several weeks has been for many systems to show in the forecast, but few to actually verify. Plus, rain events have produced less than expected precip totals. We have a very real soil moisture profile problem and the forecasts warn it will get worse before it gets better. There is nothing bearish about the forecast and we are past the point where bearish "forecasts" offer any relief to crops. We must have some actual and notable precip events, not just the forecast of one. Crops that were stressed on Wednesday but received 1/4-1/2 inch rains Wednesday night and cooler temps were still showing stress yesterday. For the areas of concern, soil moisture profiles are a problem and we don't have enough rain in the forecast, period. And, we have too many acres that fall into this category.
Wheat may have too many shorts to orderly handle much additional strength or a more aggressive phase of US Midwest weather fears. News is limited. Technical conditions are poised for more upside energy to unfold. The mistake may be to underestimate upside potential here. This thing feels like we are about to embark on a mission that totally cleanses all bearish positions, regardless of how rooted they may be in fundamental merit.
Corn tested key support/breakout areas yesterday/overnight. Short-term technical conditions don't need to spend much time in correction mode. Weather is the only fundamental input driving the price discovery process at this time. Everything else is just noise. Crops have been experiencing expanding stress, both in terms of acres and intensity. The last system to traverse through the Midwest produced less than 1/2 inch precip totals in areas of greatest concern. Producers in those areas report that the plants still exhibit signs of stress immediately following the minor precip and cooler temps. We remain poised for crop conditions to continue declining. This market has generated a lot of bearish sentiment and bearish strategies during the past 60 days and we appear likely to completely cleanse the market of these bearish positions. Remember, just a week ago we were within several cents of the spring low. Recognize also that many have wanted to shrug their shoulders at price strength potential here on weather during the past few weeks, citing large acreage and carryout ideas. All true, but we have a fundamental situation that is in decline and we really don't know the scope of the problem. It is possible in this environment that bears are forced to the exit door, and if true, it doesn't have to be a graceful exit. While the soil moisture profile has been developing for the past several weeks, the market structure is only in its infancy as a weather market. We are past the point where "forecasts" of rain can provide relief. Plus, there has been a very clear and entrenched pattern to the forecasts. Many forecasted events fail to materialize or significantly underperform forecasted precip totals. We need rain, period. The market may very quickly begin to more emotionally and visibly express the uncertainty of final crop production.
Soybeans also tested key support levels and appear to have the potential to quickly violate this week's high. News is limited. Weather concerns should begin escalating. Short-term technical conditions will provide support. Longer-term technical conditions can build the case for a very sizeable push above the $14 level, basis November. The global price discovery process can't afford for the US production to be shaved back in any meaningful way. While beans can hold off for a long time through dry conditions and still significantly benefit from later rains, there is a very real chance that the marketplace begins to more fully/emotionally build risk premium into prices. Upside potential towards $15 is not unreasonable and it is not unreasonable to believe such an event could occur very quickly.
In summary, weather and crop conditions are the only important items of focus at this time. We don't have enough precip in the forecast and the profile of the past several weeks has been for forecasted events to either not verify or to produce lighter than expected precip totals. Crop conditions are poised to continue declining and the marketplace may very quickly begin to escalate fears due to the uncertainty/unease of the situation. Reports from the country about crops still showing stress after light rain events and cooler temps should be a clear sign of the scope of our current problem/threat. More upside potential exists and I wonder if we can accelerate the scope of upside price movement here? Who will feel most uncomfortable heading into the weekend, bears or bulls? Today may not be a quiet day? The overnight range could be significantly expanded?
Barge Values: June= +74 N
CN: Support= 5.95, Resistance= 6.50
CZ: Support= 5.45-50, Resistance= 5.85-95
**PROFILE: July Corn>. Dec Corn> Key/breakout area support was tested yesterday/last night. We are poised for the next upshot to unfold. While I have not been expecting any real upside potential above the general $5.90 zone, I am beginning to think that the mistake here is underestimating upside potential. It may be true that in the "end" corn's fundamental foundation won't warrant the sustainability of this evolving rally, it is still possible that we experience some extreme, but short-lived, price rally that completely cleanses the market of existing short positions. Such an event would suggest a price move up as much as $1 or more from current values.
Barge Values: June= +62 N
SN: Support= 14.20, Resistance= 15.00
SX: Support= 13.60-75, Resistance= 14.40
SMN: Support= 420, Resistance= 450
BON: Support= 49.50, Resistance= 53.00
**PROFILE: July Soybeans>. Nov Soybeans> Key support tested. Short-term technical conditions are poised for the next up move to unfold. Do not expect a multi-day corrective pattern here. We remain poised for a push above the April highs and have the ability to maintain/continue a steep ascent. IN SUMMARY, more upside potential exists.
Barge SRW Values: June= +28 N
WU: Support= 6.60-75, Resistance= 7.50
**PROFILE: Chicago September Wheat> I am not sure what we are dealing with here, but the mistake is probably to underestimate upside potential. We might have one of those situations where, short-term, prices exceed reasonable parameters and create a great selling opportunity. However, sellers may need to be very patient and wait for existing shorts to be run over.
GLOBAL HIGHLIGHTS & HEADLINES:.
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