by Duane Lowry
Friday, August 10, 2012
SUNRISE OUTLOOK OVERVIEW:
*At 8:05 am> Grain/Soy Snapshots: Corn= 1 1/4 higher, Wheat= 18 3/4 lower, Soybeans= 17 higher.
*Where are we for the WEEK? Sep Wheat= up 21 3/4 cents; Dec Corn= up 16 1/4 cents; Nov Soybeans= up 2 1/2 cents; Dec Soymeal= up $2.30; Dec Soyoil= up 32 points; Crude Oil= up $1.96; US $ Index= up 27; Gold= up $10.90; Dow Index= up 83.
Day Session Expectations vs Night Session Tone:
Dec Corn: Support= $7.75, Resistance= $8.30-40
*Risk of major liquidation pressure beginning.
Nov Soybeans: Support= $15.95, Resistance= $16.50-75
*Risk of major liquidation pressure beginning.
Sep Wheat: Support= $8.60, Resistance= $9.10-20
*Longer-term selling interest to build on intra-day recover efforts.
Outside Market Influences:
At 8:04 am> Price Snapshots: Crude was down $1.01, Gold was down $3.10, Dow Index was down 43 and the US $ was up 11.
*Crude and the Dow will struggle to hold gains this week. The Dow seems vulnerable to a very precipitous decline at any moment that evolves into a multi-month decline.
*This morning USDA issued the following data:
Old-crop Corn= 1.021 bil, vs expectations of 945 mil bushels avg, range= 0.750-1.183, July USDA= 903
New-crop Corn= 650 mil, vs 651 mil avg, range= 400-850, July USDA= 1.183
Old-crop Soybeans= 145 mil, vs 157 avg, range= 138-200 mil, July USDA= 170.
New-crop Soybeans= 115 mil, vs 115 mil avg, range= 95-140, July USDA= 130.
Wheat= 698 mil, vs 681 mil avg, range= 600-718, July USDA of 664 bil.
US Corn= 10.779 bil, vs expectations of 10.971 bil avg, range= 9.860-11.750 bil, July USDA= 12.970, 2011= 12.358.
Yield= 123.4, vs 126.2 avg, range= 117.6-134.0, July USDA= 146.0, 2011= 147.2.
US Soybeans= 2.692, vs 2.786 bil avg, range= 2.400-2.925 bil, July USDA= 3.050, 2011= 3.056.
Yield= 36.1, vs 37.2 avg, range= 32.0-39.0, July USDA= 40.5, 2011= 41.5.
All wheat= 2.268 bil, vs expectations of 2.220 avg, range= 2.112-2.294, July USDA= 2.224, 2011= 1.999
All winter wheat= 1.683 bil, vs 1.665 avg, range= 1.610-1.707, July USDA= 1.670, 2011= 1.494
Spring= 499 mil, vs 488 avg, range= 444-542, July USDA= 472 mil, 2011= 455
Other Highlights from the USDA reports:
Soybean exports lowered 260 mil from last month.
Corn exports lowered 300 mil, to 1.30 bil bushels.
Corn use for ethanol lowered 400 mil bushels to 4.5 bil.
World corn ending stocks= 123.3 mmt, down from 134.1 mmt last month, vs 136.0 this past year.
China's corn production raised to 200 mmt, up from 195 mmt last month.
China corn import needs lowered to 2 mmt, from 5 mmt last month.
World Wheat production at 662.8 mmt, down from 665.3 last month.
World wheat ending stocks at 177.2 mmt, down from 182.4 last month, but still seen as abundant.
World soybean ending stocks at 53.4 mmt, vs 55.7 mmt last month.
Weather offers a normal to cooler than normal temperature theme during the next two weeks. Moisture improvements are expected in the Midwest, Delta and Plains during the period.
Wheat does not have any independently bullish storyline. Despite aggressive demands on global wheat to move into the global feed rations, world carryout is still projected at an abundant 177 mmt. Charts have been defining price ceiling parameters for nearly a month. Technical conditions offer little upside enthusiasm. Overall conditions warn of downside price risk of at least $1 from current levels.
Corn has now been handed bullish confirmations from USDA. The trade is saturated with spec length and speculative shorts have abandoned long ago. World users have been and will continue to make plans to avoid needing US corn. Technical conditions offer ample warnings that current price levels are not sustainable and we remain vulnerable to a very significant liquidation phase. Downside risk is into the $7.00-7.40 zone, basis Dec.
Soybeans received bullish confirmations of private forecasters' worst fears. Personally, I believe actual yields will be better than today's report suggests, but that is irrelevant. Trade focus will quickly shift all the US soybean storyline into the "known" category, shifting all "unknown" focus towards the importance of the upcoming South American production season. Early indications are for massive production expansion there. Technical conditions are not conducive to building upside momentum at this time and the gains of the past couple of sessions are unlikely to be maintained. Downside risk remains at test of longer-term support that will surface around the $15.00 level, basis November.
In summary, the reports are out, now what? Technical conditions are not conducive to building upside momentum or sustaining recent gains. A major liquidation period remains extremely likely to begin at any moment. Don't trust short-term strength. Markets have already priced in today's news. Markets are already saturated with speculative length. There is very little left in the "unknown" category. This is never good for a mature bull market. When a market is saturated with spec length, bulls only have one thing left to do…sell. The question is whether they get to do it on strength, or whether they are scared into selling on weakness because equity is eroding. There is very little for news/events on the horizon that bulls can now confidently point to as hopeful justification for holding positions. Yes, they can talk about the need for higher prices, but if post-report action doesn't begin to verify their hopes, then their fears will begin to take control.
Barge Values: August= +44 U
CZ: Support= 7.30-60, Resistance= 8.25-45
**PROFILE: Dec Corn> Short-term strength should not be trusted. This market is already saturated with length. Conditions are poised for a significant liquidation process to unfold. Downside target is something under $7.50, possibly towards $7.00.
Barge Values: August= +95 X
SX: Support= 14.90-15.10, Resistance= 16.40-70
SMZ: Support= 440, Resistance= 495-505
BOZ: Support= 51.50, Resistance= 54.25
**PROFILE: Nov Soybeans> Expect limited rally potential. Overall conditions still warn of a major liquidation phase ahead. Downside risk is at least to the $14.50-15.10 range. IN SUMMARY, major long-term resistance at current levels and prices have been defining topside ceilings for the past month.
Barge SRW Values: August= +14 U
WU: Support= 8.50, Resistance= 9.15-25
**PROFILE: Chicago September Wheat> We are in an area of long-term resistance and have been defining a price ceiling for nearly a month. Expect limited rally potential. Overall conditions warn of significant downside risk.
GLOBAL HIGHLIGHTS & HEADLINES: India this week made sales of wheat to global trading firms in what is seen as the beginning of business that will satisfy Asian feed demand that may be unable to source adequate supplies from the US. The UN's Food and Agriculture Organization says the US need to immediately suspend its ethanol mandate to avoid a world food crisis. China's trade data released today suggest global economic weakness.
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.