Wed Aug 27, 2008 06:02 AM CDT GENERAL OPENING CALL Corn futures are called 5 to 6 higher, soybeans 15 to 20 higher, and wheat 4 to 6 higher.

6:00 AM e-CBOT Corn 5 1/4 higher (December), soybeans 18 1/2 higher (November), wheat 8 1/4 higher. The solid close in soybeans Tuesday (more than 20 cents off session lows) led to higher overnight trade. Once again the new-crop November contract was able to trade almost 25 cents higher through the overnight session on renewed commercial buying. And just as the Monday overnight session saw lower trade due to the sharp rally in the U.S. dollar index, Tuesday's overnight session saw the greenback trade lower, providing support to all three grains. Corn was a follower of soybeans throughout the session. Additional support came from the rally in the energy complex.

OUTSIDE MARKETS Soybean futures at the Dalian Commodity Exchange (China) are higher with the Malaysian palm oil futures also higher. The Dow Jones Industrial Average posted a small rally on Tuesday but could come under pressure once again from the higher crude oil market. Asian markets are mixed with the Nikkei down 25.75 points. European markets are mostly lower. Overnight crude oil was $1.27 higher at $117.50 while Brent crude was $1.00 higher at $115.62. Gold futures were $10.40 higher at $838.50 while the U.S. dollar index was down .365 at 76.98.

BULL BEAR 1) The corn market should see spillover support from both the energy complex and soybean complex Wednesday, as both these outside markets posted solid rallies in the overnight session. 1) The strong carry in new-crop corn futures spreads continues to indicate the market's bearish fundamental outlook, meaning a growing acceptance of a billion-plus bushel ending stocks figure for 2008-2009. 2) Ideas that the soybean crop is going to fall short of production projections continue to gain favor. The carry in the November-to-January futures spread weakened once again in the overnight session as weather forecast remain dry over much of the growing area. 2) The recent strength of the U.S. dollar index combined with ready South American supplies could create a continued drop in demand for U.S. soybeans, meaning 2007-2008 exports could come up short of projections and adding a few bushels to ending stocks (2008-2009 beginning stocks). 3) Wheat should find support in the overnight weakness of the U.S. dollar index. Having tested initial resistance, the greenback could ease a bit waiting for the next round of buying interest. 3) Wheat seems to be trading at the whim of the U.S. dollar index with little strength to move on its own. That being the case, renewed buying interest in the greenback could send the Chicago wheat market back to its low near $7.30.



See the DTN Ag Weather Brief for complete market weather comments.

MORE COMMODITY-SPECIFIC COMMENTS CORN Corn contracts were able to move off session lows Tuesday to close only moderately lower due to spillover strength from the energy complex and the soybean complex. Left to its own devices, the corn market would have most likely continued to drift lower. This same outside support continued in the overnight market that saw the new-crop December trade as much as 10 cents higher. However the underlying fundamentals remain bearish, as indicated by the strong carry in the December-to-March futures spread, and could curb the buying enthusiasm to a certain degree. Traders continue to watch weather forecasts but remain comfortable, at this point, with yield prospects. Ultimately this should result in the resumption of the recent downtrend lasting through harvest.

SOYBEANS Strong commercial buying supported soybeans in the overnight session, indicating traders are becoming more concerned over the lack of rain in much of the growing area. Unlike new-crop corn, the 2008-2009 ending stocks situation in soybeans is projected to remain tight leaving the crop little margin of error when it comes to production. Consider this; given the 2007-2008 ending stocks of 135 million bushels (used as 2008-2009 beginning stocks) and projecting no change in USDA's August demand estimate of 2.98 billion bushels, falling short of the projected national average yield of 40.5 bushels per acre by .5 bpa would drop U.S. ending stocks to the 100 mb level. The likelihood of this type of decrease occurring continues to strengthen as weather forecast remain dry for much of the growing area.

WHEAT Wheat contracts also followed soybeans higher overnight with additional support coming from the lower U.S. dollar index. The greenback tested initial resistance near 78.00 on Tuesday before falling back, allowing the wheat market to post a double-digit rally off its session lows. However wheat will continue to bear the weight of growing world stocks, a fact reflected in the strength of the carry in the futures spreads. This combined with the newly established upturn in the U.S. dollar index should keep a check on possible rallies in wheat due to increased competition in the world export market.

DTN Cash Change From National Contract Change from Commodity Index Prev Day Avg. Basis Month Prev Day Corn: $5.36 -$0.04 -$0.40 (Sept) $0.00 Soybeans: $12.90 -$0.02 -$0.54 (Nov) $0.01 SRW Wheat: $6.16 -$0.10 -$2.14 (Sept) $0.00 HRW Wheat: $7.92 -$0.13 -$0.73 (Sept) $0.00 HRS Wheat: $8.38 -$0.17 -$0.58 (Sept) $0.01