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Weekly Gains Review for The Week of July 18, 2011

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Weekly Gains Review for The Week of July 18, 2011

Postby pitgurufk » Fri Jul 22, 2011 2:55 pm

The Grains Review
For the week of July 18, 2011

Coming back from the weekend the trade is a bit perplexed as to why things are lower. The weather situation may not be a mirror image of the late week bullishness seen last week but a 30% chance of rains in the northern states a week out with low confidence is not what I would hang my hat on if I were a bear. Looking at what happened last week traders saw a major explosion to the upside with corn beans and meal leading the bullishness while wheat and bean oil lost momentum heading into the latter parts of the week. In corn traders saw a major upside move helped by demand, weather and technical buying with funds showing a larger appetite than in previous weeks. The market did sputter a few times and came off daily highs on Friday as they saw profit taking by weak longs heading into the uncertainty of the weekend. The market is fighting weakening sentiment in spite of continued heat and demand from China with many feeling a further move to the upside is again getting ahead of ourselves. In beans traders saw a continued upside trend unbroken with Meal joining the fray moving higher for 10 days in a row with no overt weakness seen on Friday with these two pacing the overall gains on the floor. Bean oil struggled above the technical quagmire with the 50, 75 and 100-day MA's all sitting at or around 57.70. Wheat rallied but acted as the relative dog on the floor with gains only two of the five days but still showing gains on the week. There is little excitement in CHI wheat with only a fund short offering bullish momentum. A massive SRW harvest and Russian values are keeping any momentum in check. In KC and Minni traders saw small gains but once again the relative strength of wheat is muted in spite of continued problems with the HRW harvest no matter what the USDA says. As I see it, KS, TX and OK are disasters whether or not they want to admit it.

The overnight session saw surprising weakness after an early attempt by beans and meal to move higher. Corn and wheat stayed in step all night pacing the downside with corn losing on thoughts that weather may not be as bullish (WRONG) while wheat failed due to flagging demand for low quality wheat from the US. Demand for high protein wheat has waned a bit but do not look at KC and Minni as dogs this week. The problems with the spring crop are starting to move into focus. The reason for the overnight pressure can be attributed to world weakness, EU wheat weakness and continued debt concerns with sentiment towards commodity risk fading to outright hatred for reasons understandable and unfathomable.

Heading into the day session markets have continued weakness with no fresh demand talk, questionable weather domestically while the international front looks benign with talk of flooding now in areas of Germany and Poland as they try to get their winter wheat crops off. This will affect quality more than yield offering even more upside incentive to KC and Minni if this trend continues. Macros are a major drag on agriculture with a flight to gold as currencies, led by the Euro, show overt weakness. Crude is on the defensive, softs are getting crushed led by cotton and Japan is on a holiday...helped by their shocking victory against the US yesterday in the world cup. Overall look lower but watch weather maps closely for any changes. The market will be especially sensitive to weather heading into the key pollination stage for corn in the coming weeks.
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Weekly Gains Review for The Week of July 18, 2011

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