A lower start is expected in all pits, around 10-15 wheat, 3-4 corn and 7-10 beans. Crude oil and the equity markets are lower while the $ index is higher, a bearish combination for the grains. It is looking increasingly like the market is undergoing a technical correction after making eight month highs in several pits recently. The increasingly widespread thinking that prices are overbought and overdue for a correction, or at least a period of consolidation, is likely to make sellers out of many specs, either to liquidate longs or initiate new short positions, which could put a lot of pressure on the market today. There isn’t a lot of fresh news this am.

Australia’s Bureau of Meteorology is now predicting a better than 50% chance of an El Nino developing by July, more than double the normal chance. El Ninos are associated with drought conditions in Australian wheat areas. Ukraine’s Agriculture Minister cut his estimate of the 2009 grain crop from 48 to 42-43 million tonnes due to a freeze in April. Last year the crop totaled 53.3 million tonnes. Private analysts think the 2009 crop will only reach 39 million tonnes.

Technicals: The daily bar charts still look very bullish with strong uptrends in place. However, no market goes straight up and, after reaching 8 month highs in several pits recently the grains are probably in need of a pause or correction, the only question being how much. I still would not try to anticipate any turn to the downside, greatly preferring to wait until the charts show at least the start of a downtrend before getting out of our long positions, several of which we have huge profits in. For example, we are long Jul beans from roughly $11.11 and Jul wheat from about $5.97 so even a sell off today will still leave large profits. If the market somehow recovers today we want to continue riding the bullish wave so I would wait until the close before deciding whether to exit longs or reverse to the short side. ---Vic Lespinasse