Monday Night Grain OutlookBy Duane Lowry
Monday, September 3, 2012
OPENING CALL: Corn= steady-better; Wheat= steady-better; Soybeans= steady-better.
Weather provided less than expected weekend moisture. US Plains have opportunities for moisture conditions to improve during the next two weeks. Traders view US crops as "they are what they are". Traders want to begin watching South American weather, but it is really too early for that. We don't seem to have a market-moving theme/reaction to any weather storyline at this time. However, we operate in an environment where weather is always bullish…we just search the world over until we find a location and scenario that fits that mission.
News> Iraq oil exports are at a 30-year peak. China's manufacturing data released during the weekend hit a three-year low. Investors hope this news will encourage China to enact new stimulus measures. European economic data continues to worsen, as euro-zone manufacturing activity shrank for the 13th consecutive month. The French government was forced to bail out a major mortgage lender. Investors hope this will ensure the European Central Bank embarks on new money-printing measures. So basically, investors are betting that the global house of cards gets the addition of a new floor-level added to its structure.
Wheat has little for news. Global demand activity has improved, but not really moved global price structures. Friday's price action was very weak. Technical conditions will build selling interest 10-15 cents above Friday's finish, limiting the ability to develop upward momentum. This market still doesn't have the conditions necessary to produce independent strength.
Corn will lean higher on hopes the new week will be able to reject Friday's poor performance, as traders focus on next week's USDA Supply & Demand/Production data, to be released Wednesday, September 12. Traders believe US production figures will be further ratcheted lower and they will be hopeful that prices can quickly recover Friday's losses. Yield reports remain far-ranging, but it seems that we hear more comments about better-than-expected comments than many expected. The trade knows national corn yields are horrible, but there is no confidence in what that figure is. The trade doesn't know if we have already factored in this storyline with current prices, but stalling price trends in corn during the past few weeks have elevated anxiety among the bulls. To give perspective as to why corn bulls have elevated their nervousness, consider the fact that Friday's settlement finds only four days in the last month with lower closing values than Friday's finish. This occurred despite government and private confirmations of notably declining yield ideas through the last month, amid universally bullish trader sentiment. This price action is not what traders have been expecting. While we will lean higher to start the week, largely because that is the daily default setting of the trade and because the trade is hopeful that the new month will bring new buying energy, last week's lows will become very important and liquidation selling could be triggered if those lows are violated. Last week's lows are 6 1/2 cents below Friday's close. Technical selling interest is likely to build above the market, maybe 10-20 cents above Friday's close. Overall conditions continue to warn that we have a market too saturated with length and too much stagnated trade during the past month that has largely underperformed popular expectations. We are still extremely vulnerable to liquidation pressures.
Soybeans will lean higher on hopes of new buying energy surfacing in the new month, as traders focus on the next USDA production report with expectations of further crop size reductions. New news is limited. Technical conditions offer vulnerabilities. The trade is anxious to see Midwest yield data.
In summary, default trader mindsets will lead to hopeful expectations of a firm tone this week, as they shift focus to next week's USDA reports and ideas they will further reduce US production ideas. Traders are also hopeful of new speculative buying energy for the new month. This is likely to prove disappointing. Trade sentiment is currently being driven by corn and it is imperative that corn not disappoint traders this week, as it won't take much weakness to very quickly expand liquidation pressures as traders seek to protect profits. I think we are surrounded by vulnerability.
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.
© 2012 Duane Lowry. All Rights Reserved.