The Edge, Weekly Grain Outlook, by Duane Lowry                                                    Monday, November 18, 2002

In this issue:


*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.


Farmer Strategy

Corn> Producers who know they need/desire to make cash corn sales before the end of the year, need to consider any minor short-term price strength as a pricing opportunity. The cash market has plenty of bushels to work through the system. Take advantage of some good short-term carry incentives and make sales for lh Dec shipment. It will take time for the cash pipeline to work through supplies…possibly a month or more. Consequently, the premiums for holding bushels 30 days are an opportunity to make sales now…this week, as the spot bids may just languish. As I mentioned above, it is very possible that that even though we have achieved the downside target area, we can certainly see another jab into new lows at some point. There is little to get excited about in the short-term, so those who desire to make sales in the next 30 days need to consider doing so this week.

Soybeans> Current "above Loan" prices should not be ignored. While we do have the entire South American growing season to contend with, it appears to me the market has factored in the export business and there is some "what if" premium already built into current soybean prices. The spec community knows the importance of the South American season…that is why they are already long. Maybe we go sideways for a few weeks until more is know about SA production potential, but as the calendar ticks by and no serious problem develops, it will be more difficult to avoid a liquidation flush. Any strength should be used to make sales. Don't let your soybean inventory suffer the same fate as unsold corn inventory. We must face the fact that we basically operate in a "Loan Price" marketplace. When you are above Loan, you must assume the market is already building some "what if" premiums. These are selling opportunities for farmers. This summer/fall period confirmed that. Despite production shortfalls and tight carryout projections, world-pricing factors wouldn't allow those prices to be maintained once the crop was known…whatever the size. Consider wheat…huge disasters in Canada and Australia, along with a small US crop, yet the US couldn't benefit in the export market. Why? Because there are new world exporters emerging from non-traditional sources that can satisfy demand at much cheaper levels, without the buyers be forced to pay US premium prices. Russia and Ukraine filled much of the world's wheat appetite that was hoped would need to come to the US and pay US prices. Not so. Consequently, any further soybean strength must be considered a selling opportunity to protect the premium over Loan prices. If you want to bet on higher prices, determine how much you are willing to risk and buy Call Options. Don't risk the entire above Loan premium by not selling.



In summary, price weakness associated with liquidation activities in soybeans and soyoil should be the key focus during the next few 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 by the end of the year; but producers who need to make sales by the first of the year, need to consider any short-term strength this week as their best opportunity. Stay Tuned!


Report Watch

Weekly Export Sales, Thursday…trade expects good numbers.

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