With the basis at the "Gulf" starting to slip even further on poor export interest, there is some fear that "demand" rather than "yield" may soon start to be more of the focus.  Certainly there is no debating the fact that the current USDA yield number will be reduced in the weeks ahead.  The question though is starting to linger as to if and when "demand" will start to pick back up.  As end-users come to the realization and fear that US corn bushels simply may not be available in the months ahead, many may be tempted to start booking less expensive alternatives such as "feed wheat" now, before supplies become more limited later in the marketing year.  This is certainly cause for concern and poses the question as to how US exports will fair in the days and weeks ahead, as cheaper global alternatives seem to be the the only real solution.  

I am certainly not expecting a major market set-back solely caused by a reduction in "demand," especially with the USDA crop report slated just four full trading session away (next Monday). I do however believe the "Big Boy's" may be looking to reduce their overall "risk" in several of the commodity markets as more fear and concern over the European Debt situation comes back to the foreground. As I have been saying for weeks, this situation is far from over, and may continue to be a thorn in our side as we try and move to higher ground in the grain and soy markets.  

More talk is circulating that Germany's support of the European bailout is dwindling.  This is causing fear and speculation that the European banks may be in major trouble down the road. As investors scramble to find a safer alternative to the Euro, many, unfortunately are looking to the US Dollar to provide safety and liquidity. With the US Dollar higher, many commodities are under pressure this morning.  

The bottom-line is this, over the weekend, talks between Greece, the IMF and ECB supposedly broke down in regards to the new bailout funds. The Germans are completely balking over the "bailout" proposals, and see no reason they should be left to pick up the tab. Germany's political leader, Angela Merkel, and her ruling party have lost major support ahead of a parliamentary vote on the eurozone bailout mechanism. I have even heard Chancellor Merkel's ruling party lost an election in her own home state over the weekend.  There is also increasing speculation that she is actually preparing for a political farewell. Throw on top of this the fact that tomorrow morning, Germany's "Federal Constitutional Court" will deliver its ruling - awaited for over a year - on suits claiming Berlin is breaking German law and European treaties by contributing to the multi-billion euro bailout of Greece, Ireland and Portugal. With thoughts that Germany's ruling powers may soon be ousted from office and replaced by those opposing the "bailout," there seems to now be a stronger risk than ever that an end to the "European Monetary Union" may actually be somewhat of a reality. It is certainly enough concern to cause some of the larger players to take "risk-off" the table, rather than add to it. 

The European issues will certainly be the main focus this week, but we might get a little lift from President Obama's speech on Thursday as he addresses the joint session of Congress.  We will also be watching the Bank of England and the European Central Bank for any hints on Thursday that a new change in policy may be coming down the pipe.  Traders will also be keeping their eye on CPI and PPI data coming out of China mid-week as well. 

As for the weather, it seems that tropical storm "Lee" is content on dumping massive amounts of rainfall on a large portion of Louisiana, Mississippi, Tennessee and even Alabama. Rainfall between 3 to 10 inches is expected in many parts, before heading more to the Northeast.  I am hearing that some areas of Indiana and Ohio might actually see some beneficial rains develop from this system later in the week, hopefully providing another drink to the soybean crop before harvest arrives. There has also been a major cold front move through the Midwest that has finally broken the extreme heat wave. With more beneficial rains and less extreme heat, there may be a few longs fold up their tents and roll up their sleeping bags early, but I personally don't think the party is over just yet.  

I am sure you heard that "Lanworth" threw out a 143.3 corn yield estimate on Friday, and 40 bushel per acre soybean yield estimate. Who knows where we will end up with the USDA numbers, just make sure you realize we could see a national soybean yield number down around the 40 bushel per acre level (that keeps being thrown around), accompanied by a 200,000 acre reduction in total harvested acres, and we will be staring down the barrel at close to a 100 million ending stocks number, not to mention a stocks to use ratio of darn near 3%. If this is actually the case, one would have to believe we will need to add some additional premium to the soybean market. If yields approach 40 bushels per acre by the USDA prices in the mid $15's or even $16.00 would not be out of question, especially if we start to see some additional export interest shift from South America to the US during the next couple of months.

I continue to believe there is still more room to the upside....BUT we have to honor the fact that "money-flow" and a "risk-off" type mood may pressure the trade.  The situation in Europe has the "Big Boys" nervous, gold is surging to new all-time highs and quickly approaching $2,000 per ounce on fears and uncertainty. Crude Oil is under pressure as economic growth in Europe, China and hear at home are all being questioned. Bottom-line, the "outsides" are working against us, while fundamentally the crops seem to only be shrinking.  Look for Informa's numbers to give the market more direction during today's trade.  After the close the USDA crop condition report will be the focus, as traders will be eager to see if conditions have once again fallen back even further...Look for a....

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