Sunday, November 17, 2002

 

OPENING CALLS: Corn=steady-easier,     Wheat= steady,     Soybeans= 1-2 lower

 

INPUTS:

Weather> The US Midwest Corn and Soybean areas will receive 30% coverage of 1/10-3/4, locally 1 inch rains this week, favoring the east and northeast. The 6-10 day outlook suggests much-below temps in the north, below elsewhere, with mostly dry conditions in all locations. The Central and Southern Plains will experience below normal temps and precip through the next 10 days. Brazil, Mon-Tues, will experience 1/4-1 1/2, locally 2 1/2 inch rains, favoring the central and southern areas, producing 50% coverage of the wheat and 60% coverage of the corn and soybean areas. Wed-Fri, rains will shift into the central and northern areas, producing 40% coverage of the corn and soybean areas and 20% coverage of the wheat areas. Rain amounts will be 1/4-1 1/4, with locally 2 1/2 inch rains. The 6-10 day maps suggest normal to above temps, with precip normal-above in the south and normal to below in the north. For all practical purposes, Brazilian weather will be beneficial during the next 10 days. Argentina received 1/4-1 1/4, locally 2 1/2 inch rains, producing 40% coverage in the corn and wheat areas, 50% coverage of the soybean acres. Mon-Tues, 1/4-1, locally 2 inch rains will produce 50% coverage of corn and wheat, 30% of the soybeans. The 6-10 day maps suggest normal-above temps and below precip.

News> Brazil's slow start to the soybean planting pace has caught up to the 5-year average pace, as Safras pegs soy-planting is 51% complete. A USDA attaché report says Egypt's private buyers continue to source wheat imports from non-traditional suppliers such as Ukraine and Russia. The attaché report expects US wheat prices to maintain a sizeable premium to other origins for the rest of the marketing year. The attaché report says Egypt has offered no reason for the recent US purchases at more than $50 premium to French wheat, other than "economic" reasons.

 

SUNDAY NIGHT SPIN:

"Steady" Wheat> Lack of news after last week's very volatile, but in the end analysis, a supportive/stabilizing week. The C-O-T report suggests a week or two of stabilizing action will largely complete whatever liquidation process was underway.

"Steady-easier" Corn> Here too, a lack of news exist for tonight's trade to focus on. Friday's reversal-down, disappointing action, will likely start us with a slight bias for weakness tonight. HOWEVER, the overall stabilizing action of last week will encourage buyers to participate on weakness.

"1-2 lower" Soybeans> Mixed short-term signals may exist tonight. However, Friday's performance was weak and seemed to signal the "strong demand" story has run its course and can be officially labeled as "old news". South American planting progress has caught up to "normal" levels and the weather forecast looks largely favorable for the next 10 days. The C-O-T report appears a bit threatening that liquidation activities may soon unfold.

 

ASSESSMENT:

Very little news and some mixed short-term signals may suggest a quiet night tonight. The one possible exception could be soybeans where I see real threats of liquidation selling activities and after a very disappointing performance for the bulls on Friday. It is possible soybeans find active selling interest tonight?

 

*Last week's performance> Dec Wheat= up 7 1/4 cents, Dec Corn= up 6 1/4 cents, Jan Soybeans= up 4 3/4 cents, Dec Soymeal= up $0.90, Dec Soyoil= up 40 points, Dec Oats= down 5 1/4 cents.

 

Looking Ahead> The lack of news environment isn't likely to be conducive for furthering last week's gains in any of these markets. Corn may choose to revisit/jab last week's lows sometime during the next 1-2 weeks, as we suffer the typical gravitational affect of 1st-Notice Day and holiday doldrums tone begins its seasonal arrival.

Wheat has accomplished a lot in the last several trading sessions. This market may still need to languish with a weaker bias into the end of month on lingering liquidation pressures associated with the recent chart collapse. Downside objectives were achieved last week, and most likely a buying opportunity will be presented sometime during the next couple of weeks. Some sort of partial retest of recent lows is likely before the end of the month.

Corn has also achieved downside targets during the last several trading sessions. A couple weeks of stabilizing action would be a very healthy development. Some contract months may make new lows during the next couple of weeks, but any weakness of that nature will be long-term ownership opportunities. It may take some time for the market to work through cash supplies in the western Midwest piles, but still tight carryout levels and possible increase in demand pace will still provide winter rally opportunities. 

Soybeans have had plenty of "good news" during the last couple of weeks, but price action has been sideways, distributive in nature. Friday's price action, despite bullish demand news and emotional rhetoric before the opening, did not provide a good report card on the condition of this market. The C-O-T report also confirms problems of "saturation" may exist. With no real problem in South America at this time and "tired/built-in/old news" seeming to be the case, liquidation pressures could quickly build into the end-of-the-month. Downside potential is something around 30 cents from current levels…certainly more than any current rhetoric believes possible. Soyoil is also vulnerable to a very sizeable correction from last week's highs. Soymeal can erode lower as well.

In summary, price weakness associated with liquidation activities in soybeans and soyoil should be the key focus during the next two weeks. Wheat and Corn will stabilize, but maybe in an eroding lower fashion during the next 2 weeks. LONG-TERM BULLISH STRATEGY OPPORTUNITIES should present themselves near the first of December. Despite the disillusionment likely to be found by the day after Thanksgiving, we could have some very impressive winter rallies during the next 3 months! Stay tuned!

 

***Despite the fact that I may see mostly weakness during the next two weeks and all of my article tonight "reads" bearish, except for the last 4 sentences, there are plenty of overall supportive reasons to be bullish and optimistic during the next period of time. Kent Beadle offers an excellent presentation of his more optimistic stance just ahead. Read his excellent and very timely report here> "Is the Marketplace Becoming Too Complacent?" 

 

*Thanks for your time and attention!

 

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.