Grains Review - July 12, 2010

The Grains Pitguru Review
For the week of July 12^th, 2010

Friday saw WASDE deflate any upside ideas in wheat with old crop complex factors showing the best strength heading into the weekend. There was little action in corn with the market failing against the recent highs with no weather concerns on the immediate forecast. The ridge is still there but it’s a bit deflated as compared with late last week. This added to a lack of weather concern in China and enhances the corrective possibilities with no news coming over the weekend to spark the next upside move. Macros are not helping bullish sentiment pointing to a short term correction with corn and wheat sure to be the weaker of the big three with bean demand from both China and domestic crushers remaining firm in old crop. Bean oil should gain against meal due to a correction in the latter market and growing concern in the Canadian prairies. The overnight fell but recovered off nightly lows with no real pressure seen but no reason to rally. Looking at the day session there is little direction seen that differs from the overnight with a strong USD adding to slight bearish momentum and nothing coming from either crude or gold to spark major movement. Look lower without drama to start the week.

Beans are called flat-2 lower to start with July and new crop looking weakest. The 200-day MA in Sep is the first downside corrective target. Corn is called flat/mixed to start with the 100-day MA sitting at 375.50 acting as the first downside consolidation target. Wheat is called flat/mixed with the 200-day MA and Friday’s low sitting at 532.50 acting as first support. Soy Meal is called flat-1 lower with the range high at 291.30 acting as firm resistance with the 200-day MA acting as the first downside consolidation target. Bean Oil is called 10-20 lower looking to hold the 20-day at 37.44 with the 50-day at 37.82 acting as the first bullish target.

Open Interest moved as follows: Beans +3794, Corn +8874, Wheat +-391, Meal +1792 and Bean Oil -2186. The small drops in bean oil I attribute to shorts exiting on the recovery above the 20-day MA. Short term money in corn is a risk to bulls with any pullback approaching the 100-day MA sure to bring in liquidation.

Argentina has stopped issuing Beef export licenses which may be the first step in limiting corn and bean exports. Nothing immediately bullish but if they continue to curb food inflation, currently at 20%, the world will have to come to the US for old crop beans and meal.

Late sales of 152,500 TMT US corn for new crop to an unknown, probably China though it cannot be confirmed as of yet.

By PitGuru Matthew Pierce