Lower Crude Oil; Higher Dollar Pressure Grains

A lower start is expected in all pits this am,10-15 wheat, 5-10 corn and 3-5 beans, following overnight losses. Crude oil is lower while the $ is much higher, a combination that is very likely to pressure the grains.

There is talk Iraq bought 500,000 tonnes of Canadian and Black Sea origin wheat and nothing from the US but this isn't confirmed yet. Argentine lawmakers have proposed lowering the 35% bean export tax if farmers use the savings to buy hecho en Argentina (Argentine made) farm equipment, such as tractors. This could make Argentine beans more competitive in the world market.

Deliveries were 0 in meal, 3000 oil and 557 beans this am. Dreyfus stopped 428 oil and put out 75 beans. The delivery dates were Dec 8 for the beans and Dec 29 for the oil.

Light, isolated rain fell in parts of Argentina's main grain growing provinces overnight with more of the same possible today and tomorrow before dry weather returns Fri-Mon, along with hot temps Sun-Mon. Tue-Fri next week the long range forecast calls for mostly hot and dry conditions with the exception of southern Buenos Aires province, where rain is expected. Brazil had scattered rain in the north the last 24 hours but dry weather in the south. Up to 2.5" of rain is forecast in Parana and Rio Grande states in southern Brazil today-Friday which will be welcome, especially in Rio Grande.

There is still no cold weather threat for the winter wheat belts of the midwest or southwest the next 7 days.

Grains Expected Higher Following Technical Correction

A higher start is expected this am, 3-5 wheat, 5 corn and 10 beans, following overnight gains. The market needed a technical correction after 3 weeks of steadily climbing prices and we had one yesterday, falling sharply from opening highs to a lower close. The fact that there wasn't any followthrough selling overnight is encouraging for the bulls this am, especially in view of the lower crude oil market. Supportive influences are coming from the lower $ as well as ongoing dry weather worries in Argentina and southern Brazil.

There is talk in China the government is going to allow 500,000 tonnes each of wheat and corn exports as well as 200,000 tonnes of rice. There is no indication of export subsidies, however, so actual exports, at least of corn, should be nil as Chinese corn prices are not competitive in the world market. A Ukrainian analytical firm is estimating the Ukraine will only produce 35.5 million tonnes of grain in 2009 vs roughly 50 million tonnes this year.

Argentina was dry the last 24 hours with more dry weather forecast today. Light, scattered rain is forecast in Cordoba province tomorrow with generally dry weather across the country Thur-Sun. Temps are expected to heat up this weekend into early next week, further stressing corn and beans. Brazil is benefiting from rain in southern Mato Grasso this am but dry weather has been the rule the last 24 hours elsewhere with more dry weather forecast today. Welcome rain is forecast in Parana Thur-Sat while Rio Grande is forecast to stay dry until much needed scattered rain arrives Thur-Fri. Emater, the Brazilian government crop supply agency, says Rio Grande state has had less than 50% of normal rain so far this month, stressing beans there.

There is no threat of any damage to the winter wheat crop from cold temps in the midwest the next 10 days and in the southwest the next 7 days, according to Meteorlogix Weather. ---Vic Lespinasse

Middle East Unrest May Push Grains Higher

A higher to sharply higher start is expected this am, barring a sharp sell off in crude oil. Grain prices jumped overnight following the big rally in crude oil due to Middle Eastern fighting. The sharply lower $ overnight and this am is also expected to lend support to the grain market. Dalian, China grain futures were sharply higher today. The three pillars of Friday's rally, South American dry weather worries, higher outside markets, and very bullish chart patterns, remain intact this am and they are likely to propel grains sharply higher again today, as they did overnight.

China's agriculture minister said China will harvest a record grain crop again this year, about 528.5 million tonnes vs 510 million in 2007. Pakistan will supposely be in Jan 10 for 250,000 tonnes of US white wheat.

Isolated weekend rain fell in Cordoba, one of Argentina's 3 main grain growing provinces. Scattered rain is forecast Tue-Wed, up to .6" before dry weather returns Thur-Sun with very high temps forecast this coming weekend. Brazil continues to fare better than Argentina with up to 1.5" of beneficial rain in Mato Grasso over the weekend although dry weather was the rule elsewhere. It will be mostly dry today and tomorrow but rain is forecast in Parana state Wed-Fri. Dry weather is forecast most of this week in southern Brazil, Rio Grande state, increasing stress on beans there. Overall, Brazilian weather is favorable in the north, less so in the south, especially Rio Grande while Argentine weather is relatively poor, too hot and dry. The longer it stays this way, the more bullish an influence it becomes for the US grain market, especially corn and beans.

There is little threat of winter kill (damage from freezing temps) in the midwest or southwest the next week or longer despite the lack of snowcover to protect the dormant wheat crop.

Keep watching the outside markets and South American weather for direction today. I would stick with the trend, which remains up, again today.

Grains to Open with No Overnight Guidance; Minimal Outside Influences

A mixed start is expected this am. There was no overnight trading to offer early guidance due to the Christmas holiday. Crude oil is much lower this am, a bearish indicator for the grains. The $ index is steady, not providing any direction at this time for the grains.

The charts look bullish for wheat, beans and meal with a strong uptrend in place the last couple of weeks. The corn chart is friendly but doesn't have as strong an uptrend while the oil chart looks sideways.

Weekly export sales were out this am: Wheat was 254,000 tonnes, less than the 300-500,000 tonnes expected; corn sales were 551,000 tonnes, in line with trade ideas of 300-650,000 tonnes; beans were 585,000 tonnes, in line with expectations of 500-700,000 tonnes; meal sales were good at 146,000 tonnes, over the 50-100,000 tonne estimates; oil sales were 5400 tonnes, near the low end of the 5-10,000 tonne trade estimate.

South American hot and dry weather worries continue to build. If the current mosly hot and dry pattern persists over coming weeks and months, this will be a very bullish influence for the US grain market.

Argentina was dry the last 48 hours and more of the same is forecast today through Wednesday. Temps are forecast to be above normal much of this time. This hot and dry pattern will further stress corn and beans. Brazil benefited from up to 1" of rain in the north over the last 48 hours while up to .6" of welcome rain fell in the south during this time. It will be mostly dry today through Wednesday except for isolated light showers in the south. Despite the Christmas rain, more rain will soon be needed again in Brazil as temps periodically turn hot, increasing the need for moisture.

There is no threat of winter kill for the soft red or hard red winter wheat belt the next week or longer in the midwest or southwest with temps forecast to be seasonally mild.

We have normal trading hours today.

Grains Receiving Mixed Signals Ahead of Shortened Trading Day

A mixed start is likely this am, steady wheat, down 2 in corn and up 2 in beans. Crude oil is down but the $ is weaker, sending mixed signals to the grains. Lately, the grains have traded somewhat independently of these outside markets and we could do so again today unless crude oil or the $ make a major move in either direction.

There isn't a lot of market moving news overnight but some things to be aware of: Argentine farmers blocked a rural highway to protest government policies. If these protests were to spread, they could disrupt Argentine grain marketing, which would be bullish for the US market. No widespread protests are expected for now but the situation bears watching as earlier this year Argentine farmers protests turned into a national strike that halted exports and boosted US grain prices.

Jan beans ended over $9.00 yesterday for the first time in over a month, a technically bullish signal for beans.

Chinese officials confirmed they will buy 20 million tonnes of corn from Chinese farmers on top of the 10 million tonnes they have already committed to buying. However, the officials made no mention of buying any more beans beyond the 3 million tonnes they have already said they will buy. There were rumors earlier in the week the government would buy more beans as well as corn and this helped drive bean prices sharply higher that day both here and on the Dalian, China grain futures market. The lack of any confirmation of more bean buying by the government could put some pressure on beans today, especially after they confirmed more corn buying.

Russia's Agricuture Minister said Russia will harvest over 108 million tonnes of grain this year vs a previous estimate of 105.5 million tonnes. Last year Russia only harvested 81.8 million tonnes. They also banned wheat exports earlier this year to conserve supplies but now they have plenty of wheat to export. What a difference a few months makes!

Speaking of what a difference a few months makes, the CRB index of 19 commodities hit an all time high of 474 in July, only to fall to a 6 1/2 year low of 208 by early this month! Similarly, open interest in corn soared to 1.4 million contracts earlier this year as index funds kept buying. Only to fall to around 800,000 contracts now as index funds have liquidated much of their long positions.

Argentine was dry yesterday and will stay this way the next few days with temps above normal. Some light, scattered weekend rain is forecast but dry weather is likely again Monday, stressing corn and beans. Brazil saw light rain in the south the last 24 hours, including Rio Grande, where it is most needed. More rain is possible in the Rio Grande today and in Parana tomorrow and Friday. Up to .6" is forecast in Rio Grande and up to 1.5" is likely in Parana while the north, Mato Grasso, remains dry.

Look for a two-sided, dull trade with light volume today and remember we end at Noon US Central time.

Bearish Crush Report Against Friendly Influences May See Grains Open Mixed

A mixed start is likely this am, roughly 5-10 lower wheat and 1-3 higher corn and beans. Crude oil is a little higher currently while the $ index is a bit lower, a friendly combination for the grains. Dalian, China grain futures, which were sharply higher to limit up yesterday and helped drive our bean market higher, are mixed today.

The Census Bureau Nov crush was 144.6 million bushels, about 1.5 million bushels less than expected. Due to this lower crush, product stocks figured to be below trade ideas. However, they were much higher than expected, which is bearish for them: oil stocks were 2.562 billion lbs, about 125 million lbs over trade ideas; meal stocks were 599,000 short tons, around 239,000 short tons over trade estimates.

Pakistan bought 490,000 tonnes of wheat and is negotiating for another 100,000 tonnes. Origin is thought to be Black Sea, mostly Russian, and nothing from the US. However, Egypt is in the market for optional origin wheat today with results likely before our opening. Results of Egypt's tender could influence the opening in our wheat market this am.

Yesterday, Rosenthal ended up buying 10,000 Feb 450 calls and selling 10,000 Feb 300 puts. The open interest in these strikes jumped over 9000 in each. Rosenthal also supposedly bought 10,000 Mar 430 puts but the open interest report this am shows no volume in this strike. Instead, it shows over 10,000 trading in the Mar 430 calls with the open interest falling 4000 so this is what I think Rosenthal traded yesterday, not the puts in this strike.

Argentina had light, scattered rain in parts of Cordoba and Santa Fe provinces the last 24 hours. These two provinces, along with Buenos Aires province, are the three largest Argentine grain growing provinces for wheat, corn and beans. Mostly dry weather is forecast today through Sunday in all three provinces, increasing the need for more rain there soon. Brazil was mostly dry the last 24 hours. Rain is forecast in the southern half of the country today and tomorrow with rain continuing off and on in Parana state through Sunday. Parana is the second largest bean producing state in Brazil and the largest corn producer. It will be dry elsewhere in Brazil after tomorrow.

The threat of winter kill in the winter wheat belt appears to be over for the time being with temps warming in both the midwest and the southwest. Some damage might have been done by the recent cold spells in these areas but it is hard to quantify. Only light, scattered precipitation is forecast in the southwest winter wheat belt the next week or so.

Jan options expire at the close today.

Higher Crude, Lower $ Friendly for Grains Open

A mostly higher start is likely this am, 2 up in corn, 15 higher beans but steady/down 1 in wheat. Crude oil is a little higher while the $ index is a bit lower, a friendly combination for the grains.

There is talk in China that the government, through the National Development and Reform Commission, is going to buy 20 million tonnes of corn from farmers on top of the 10 million tonnes they have already committed to buy, in an effort to support farmers income in the face of a record 160 million tonne corn harvest this year. (The government has only bought 3 million tonnes so far out of the 10 million they already promised to buy.) There is also talk the government is considering buying more beans from farmers, on top of the 3 million tonnes they have already committed buying. Dalian, China grain prices responded to these rumors by rallying sharply higher to limit up today, lending credence to the rumors.

On the other side of the world, a spokesman for the Argentine Agricultural Secretariat said the government is considering cutting the 35% bean export tax to 30% rumors of which have been widely reported in the Argentine media since last week. The spokesman also said the export tax on sunseeds might be cut 5% to 27%. If the bean export tax is cut, this would be negative for US bean prices as it would make Argentine bean exports more competitive in the world market.

Separately, for those of you keeping track, Rosenthal on Friday bought a total of 3000 Feb 340 corn puts from 12-13 1/4 while Bunge spread a total of 1000 Mar/Jan meal.

Argentina had up to .75" of scattered rain over the weekend, especially in Cordoba, one of their main grain growing provinces. This rain was very welcome. However, mostly dry weather is forecast this week, which will stress the corn and bean crops. Brazil was generally hot and dry over the weekend. Scattered rain is forecast in the north today-Wednesday. Up to 3/4" of light rain could fall in Parana, Brazil's second largest bean and largest corn growing state, tomorrow and Wednesday. More welcome rain is forecast the second half of the week in Parana but further south, in Rio Grande, the third largest bean growing state, dry weather is forecast most of the week, further stressing beans there.

There was very cold weather in the winter wheat belts of the midwest and southwest over the weekend, with more of the same the next few days. This keeps the threat of winter kill in the picture, which is supportive for wheat.

Expect relatively quiet holiday trading this week. We close at Noon US Central time, Wednesday with normal hours Friday. Keep an eye on the $ and crude oil for guidance in the grains.

Bearish Factors & Overnight Losses May Open Grains Lower

A lower start is expected in all pits, roughly 10-12 down wheat, corn and beans following overnight losses. The $ is very strong this am and crude oil is down, a bearish combination for the grains and the reason for the overnight losses. As long as these outside markets point strongly lower, the grains will very likely remain under pressure today.

US corn sales this crop year remain way behind last year's pace. Since the crop year started Sep 1, sales are almost 700 million bushels behind last year's pace with the USDA projecting a drop of only 636 million bushels this crop year vs last.

Iraq bought 100,000 tonnes of wheat each from Canada, Romania and Australia, according to reports this am. Iraq has diversified their sources for wheat, not taking any US origin wheat since May. Brazil's National Association of Fertilizer Distributors reported Brazilian fertilizer deliveries fell 50% in November vs November last year. Lower fertilizer use by Brazilian farmers this year, due to high cost and tight credit, will result in lower crop yields, as previously reported.

India confirmed reports it will allow 2 million tonnes of wheat exports this crop year after harvesting a record wheat crop of over 78 million tonnes. Indian officials expect an even bigger crop this coming year.

Late yesterday, Bunge spread more Mar/Jan meal, doing 1500 on the day from 20 points under even money to 30 points over even money.

Argentina saw up to 1" of welcome rain scattered in parts of their corn and bean belt overnight with more of the same forecast today through Sunday. Amounts could reach as high as 1.5" from this expected rain within the next 72 hours. Temps will remain on the warm side and dry weather is forecast to return the first half of next week. Brazil saw isolated rain in the north yesterday. More welcome rain will fall in the north the next several days, through the middle of next week. Southern areas will benefit from rain the first half of next week, where it is needed.

Traders will continue watching both the soft and hard red winter wheat belts, in the midwest and southwest respectively, for winter kill which could threaten areas where snow cover is lacking the next several days.

Jan options expire at the close Tuesday. ---Vic Lespinasse

Lower Crude Oil May Affect Current Trend in Grains

A higher start is expected this am, 5-8 in wheat and beans with corn up around 5. The $ is lower again this am, which is friendly for US grains as it makes US exports more competitive in the world market place. However, crude oil is lower this am, a negative influence for the grains, especially corn and bean oil due to their biofuel link.

Weekly export sales were slow for wheat at 262,000 tonnes, and oil at 1500 tonnes. Corn sales were in line at 612,000 tonnes, as was meal at 62,000 tonnes. Bean sales were very good at 894,000 tonnes, mainly thanks to China, who accounted for almost all the business. On top of this, the USDA just announced the sale this am of 116,000 tonnes of beans to China.

Rumors continue in Argentina today that the government is considering cutting the export tax on beans, currently at 35%. The government denies it is considering this but if they did, it would be bearish for US bean exports as a lower export tax would make Argentine bean exports more competitive vs US bean exports.

Technically, all the grains except oil have a bullish upward trend on the bar charts, which could promote some technically-oriented buying again today. Man bought about 10,000 of the $3.00 Mar corn puts the last two days.

Only light, isolated rain fell in parts of Argentina's grain belt yesterday with more of the same forecast today through Saturday. Temps are expected to remain above normal. However, cooler temps and better rainfall is forecast early next week with up to 1" of scattered rain forecast then in parts of the corn and bean belt. Brazil will see more welcome rain in the north early next week but southern areas will remain mostly dry, increasing the need for moisture there soon.

The threat of winterkill remains in the southwest winter wheat belt where snowcover is sparse. However, snow is forecast in northern parts of the belt today with more possible this weekend before dry weather returns the first half of next week. ---Vic Lespinasse

Friendly Combination in Outside Influences Could Keep Grains Higher Again Today

A higher start is tentatively expected this am, roughly 10 in wheat, 5 corn and 12-15 beans. Crude oil is higher and the $ a little lower, a friendly combination for the grains. However, crude oil has been trading on either side of unchanged this am and the $ is only slightly lower, a pattern that could reverse by the time the grains open, which would remove needed support for the grains, hence the tentative nature of this morning's higher opening call. There isn't a lot of fresh market moving news this am.

JP Morgan, probably acting for Cargill, was a buyer on the close yesterday of 400 Mar wheat, 1000 Mar corn, 500 Jan beans, 200 Jan meal and 300 Jan oil. This probably doesn't mean much but it is comforting to the bulls.

President-Elect Obama has named former Iowa govenor Tom Vilsack to be the next US Secretary of Agriculture.

Calpers, the largest pension fund in the US, has said they are going to broaden their approach to commodities investing. Up until now they have followed the index fund long only model, especially the SP GSCI (S+P Goldman Sachs Commodity Index), which is having a losing year. Calpers said they will hire additional commodity advisors and consider investing in commodities from both the long and short side, following trends in both directions rather than only the long side.

There is talk in China the government is considering buying an additional 5 million tonnes of corn for state reserves to boost prices for Chinese farmers. The government has already committed to buy 10 million tonnes of corn to help lift prices.

Technically, wheat, corn, beans and meal all look bullish on the charts with a higher trending prices the last week and a half.

Argentina had isolated overnight rain with more of the same forecast today and tomorrow, followed by dry weather Fri-Sat. A better chance of rain is forecast early next week, which is badly needed following the recent spell of hot and dry weather in most of the corn and bean belt. Brazil had more welcome overnight rain in the north with up to 1.5" especially in Mato Grasso. There was light rain in Parana also but it is still too dry in Rio Grande in the south. More rain is forecast in the north and central part of the country today while the south remains too dry. However, there is a chance of beneficial rain in Rio Grande mid next week, where it is most needed.

More snow is forecast in the midwest later this week and over the weekend following an overnight storm. This will provide some protective snowcover should temps fall sharply in the soft red winter wheat areas of the midwest and provide moisture for the wheat crop when it emerges from winter dormancy in the spring. The southwest winter wheat belt needs protective snowcover and there was a little overnight with more expected tomorrow. The threat of damaging cold temps in this region remains, however, and more snowcover is still needed. ---Vic Lespinasse

Mixed Start Likely in Grains with Mixed Outside Influences

A mixed start is likely this am, up 1-2 in wheat, down 2-4 in corn and up 5-10 in beans. Crude oil and the equity markets are a bit higher this am while the $ index is a bit lower, a friendly combination for the grains.

Saudi Arabia will be in the market Jan 5 for 500,000 tonnes of optional origin milling quality wheat. Various countries are in for optional origin wheat tomorrow and Pakistan is in at the end of the week for 500,000 tonnes of optional origin wheat.

The Nov Consumer Price Index report this am showed a drop of 1.7%, the largest monthly drop ever. This could be negative for all commodities, including grains, since it is deflationary and, by definition, deflation is a negative influence, just as inflation is a bullish one.

The Federal Reserve Board is expected to cut interest rates today with an announcement at 1:15pm, US Central time. This will impact the $ and could indirectly influence grains tomorrow. OPEC is expected to cut crude oil production in a meeting tomorrow, which could also influence the grains. The only question regarding the Fed and OPEC moves is "How much?" Keep watching the outside markets for guidance in the grains, even though the grains did show some limited independence yesterday.

Argentina will be mostly hot and dry the next several days although there is a little isolated rain in the forecast the next few days. The next chance of good rains comes this weekend, along with cooler temps. Corn and beans are being stressed in Argentina currently, increasing the need for rain soon. Brazil saw up to .6" light rain in Parana overnight, but it was dry elsewhere. Rain is forecast in the north the next two days, where conditions are favorable overall. More rain is forecast in the north this weekend but dry weather is forecast to return to the south, increasing the need for rain there again soon.

There is a cold weather threat in the southwest winter wheat belt the next day or two as snow cover is largely lacking to protect the crop. Light precipitation is forecast this week, along with rising temps later in the week. The midwest will see snow several days this week, providing more sub-soil moisture for the wheat crop when it comes out of dormancy next spring. ---Vic Lespinasse

Overnight Gains May Boost Grain Open

A higher start is forecast across the floor, around 10-15 wheat, 10 corn and 15-20 beans, following overnight gains. The outside markets mostly point higher this am with crude oil sharply higher and the $ index much lower. Equities are lower this am but not enough to pressure grains.

The National Oilseed Processors Association Nov crush was 139.4 million bushels with oil stocks 2.042 billion lbs, both in line with trade ideas. Meal deliveries jumped this am with Bunge putting out 210 of the 211 delivered. The only commercial stopper was Dreyfus and they only stopped 1. Looking back to Friday, the final estimates for Rosenthal in corn were 3500 May corn bought along with 6000 Jan 340 puts and 2000 Jan 320 puts.

Up to .5" of much needed rain fell in parts of Argentina's grain belt over the weekend but mostly dry, hot weather is forecast this week, which will stress corn and beans. Brazil enjoyed rain in the northern grain areas over the weekend, with up to 1.5" in Mato Grasso, their largest bean growing state. Up to .6" fell elsewhere in Rio Grande and Parana overnight. More rain is forecast in Mato Grasso the next 3 days with light, isolated rain elsewhere. Mostly dry weather is likely the second half of the week. More rain is needed soon in southern Brazil to keep corn and bean prospects favorable there.

Light, scattered precipitation is forecast in the midwest this week, which will provide moisture for the soft red winter wheat crop when it comes out of dormancy next spring. The southwest hard red winter wheat belt had a mostly dry weekend and it will remain this way the first half of this week. Light, scattered precipitation is forecast the second half of the week. ---Vic Lespinasse

Crude Oil and Equities Will Pull on Grains

A lower to sharply lower start is likely this am, similar to overnight losses: 10-15 in wheat and corn, 20-25 in beans. Crude oil and equities are sharply lower, sending a strong bearish signal to the grains. The $ index is lower, which is supportive for the grains, but not enough to offset the crude oil and equities bearishness.

The USDA announced this am China bought 116,000 tonnes of US beans, the second day in a row China took US beans. There is talk China bought as much as 450,000 tonnes of mostly US origin beans Tuesday and the announcements of these last two mornings suggest this talk is correct with more announcements possible.

Bunge put out 397 of the 834 oil deliveries this am, which could weigh on the nearby oil spread. Only 138 wheat and 96 corn were delivered this am.

Informa will put out revised acreage estimates for next year at 10:30am US Central time today. Farm Futures magazine released a survey which shows farmers plan to plant 85.1 million acres of corn next spring vs 85.9 million this year. The survey showed bean acreage of 80.1 million acres, up sharply from the 75.9 million planted this year. Wheat acreage was estimated at 61.7 million acres, down 2.2% from this year. Corn export sales were better than expected yesterday in the weekly export sales report but they remain 48% lower than last year at this time with the USDA expecting only a 26% year over year decline.

Energy Secretary designate Steven Chu could differ from President Elect Obama in their views on bio fuels: Chu favors next generation cellulosic ethanol rather than corn-based ethanol. He has a reputation as a staunch opponet of the use of food products to make biofuels and said at a conference last spring that corn was the wrong crop for bio-fuels.

There is talk in Australia of more wheat quality losses from ongoing wet weather and harvest delays. More rain is likely today in some Australian wheat areas, where it is most unwelcome. Argentina will see only light, scattered rain today in the south with dry weather everywhere else. This dry pattern will continue across the country this weekend through Tuesday. Light rain is forecast Wednesday but more hot and dry conditions are predicted Thur-Sun next week, stressing corn and beans. Brazil saw up to 1" of welcome rain in the north yesterday with dry weather in the south. The same pattern is forecast today through Wednesday with the south remaining dry all next week, increasing concern for corn and beans there.

USDA Report Figures and Pre Open Commentary

The latest opening call isn't nearly as bearish as earlier calls with corn now only called 5-15 lower, wheat expected down around 5 and beans called steady to 7 lower. This much less bearish opening call is due to the much weaker $ and higher crude oil market this am. The equity markets are lower, which isn't friendly for grains but they aren't down enough to weigh on the grains. 700 wheat was delivered this am along with 200 corn and 500 oil. There were no major commercial stoppers.

The USDA anounced this am that China bought 120,000 tonnes of US beans. Informa will put out their acreage estimates tomorrow am at 10:30am US Central time. A survey of Illinois farmers showed they currently intend to plant more beans next spring, which isn't surprising, but less corn, which is a surprise. Joe Glauber, Chief Economist of the USDA said recently he thinks US farmers will plant about 4 millon more corn acres next spring, about 90 million total.

The USDA estimated the corn carryover at a whopping 1.474 billion bushels, 240 million higher than the trade expected! The wheat carryover was put at 623 million bushels, about 25-30 million higher than indicated while beans were estimated at 205 million bushels, in line with trade ideas. World ending corn stocks jumped sharply, to 123.8 million tonnes vs just 110.1 million estimated in Nov. World wheat stocks were 147.35 million tonnes against 145.3 million last month. Beans were virtually unchanged, 54.2 million tonnes against 54.1 million last month. Meal stocks were actually a little lower, 5.88 million tonnes vs 6.42 million last month and 2.47 million tonnes of oil compared with 2.53 million last month. The USDA was aggressive in cutting their estimate of corn usage for ethanol, now put at 3.7 billion bushels vs 4.0 billion last month, reflecting the sharp drop in the price of crude oil, which reduces demand for this alternative fuel, and US ethanol plant closings due to bankruptcies. They left their estimate of bean oil to make biodiesel fuel unchanged at 3.1 billion lbs, however. The USDA also hiked their world wheat production estimate to another record, 684 million tonnes vs 682.4 million previously.

China's corn production guess was increased by the USDA to another record, 160 million tonnes vs 156 million last month. They cut their guess on the size of Brazil's bean crop to 59 million tonnes from last month's 60 million, reflecting credit problems of Brazilian farmers, which are expected to force them to use less fertilizer, trimming yields. Other countries production estimates had only relatively minor changes except the USDA hiked Canada's wheat crop guess to 28.6 million tonnes vs 27.3 million last month.

In other news, weekly export sales were slow for wheat at 239,000 tonnes, meal at just 18,000 tonnes, and oil at only 500 tonnes. Corn sales were good at 929,000 tonnes this crop year and 130,000 tonnes next crop year. Bean sales were also strong at 810,000 tonnes.

Wet weather problems continue to plague eastern Australian wheat, slowing harvest and probably hurting the quality of the crop. More unwanted rain is forecast there the next few days. Argentina will see only light, scattered rain in the south later this week and temps are forecast to heat up next week with little rain forecast. This will keep concerns growing about the condition of the corn and bean crops there. Brazil saw up to .75" beneficial rain in the north the last 24 hours while the southern part of the country was dry. More rain is forecast in the north the next several days while the south is expected to remain dry, stressing corn and bean crops there.

The US midwest will see welcome moisture early next week, which will benefit the soft red winter wheat crop. The southwest winter wheat crop will also benefit from rain early next week. The 6-10 day calls for above normal precipitation in both the midwest and southwest, which should help keep the wheat crop in good shape moisture wise for when it comes out of dormancy next spring.

Overnight Gains in the Grains Indicate Higher Open

A strong start is indicated this am with higher crude oil and equity markets along with a slightly lower $. Overnight grains posted big gains and the early call matches those gains, up 5-7 wheat,10 corn and 20-25 beans. Of course, this is tentative, depending on what the outside markets are doing right before the grains open.

The USDA Dec supply/demand report is tomorrow am, which should prompt some evening up and positioning today. Deliveries this am were 1000 wheat to Dec 9, 667 corn to Dec 8 and 764 oil to Dec 1. Bunge stopped 455 of the oil, which might lend some support to the nearby oil spread. The cash bean market at the Gulf has firmed roughly 10 cents from last week amid talk of Chinese buying interest. For example, FOB (free on board) beans for Jan shipment were offered at 89 cents over Jan vs just 77 over last week.

Reports out of Parana, Brazil's largest corn producing state, say hot and dry weather there over recent weeks has stressed the corn crop, hurting yields. Argentina saw up to 1" of scattered rain yesterday, mainly in Cordoba and Buenos Aires provinces, two of Argentina's biggest grain producers. Light rain is forecast today and tomorrow, followed by hot and dry weather Fri-Mon. More rain would be welcome in Argentina, especially in view of the expected hot weather coming up. Brazil had up to 1" of welcome rain overnight in the south. It was dry in the north yesterday. More rain is forecast in the south today with rain moving to the north tomorrow and up to 1.5" Friday. Additional rain is forecast in the north over the weekend but it will stay dry in the south, increasing the need for more moisture there soon.

Both the midwest soft red winter wheat and southwest hard red winter wheat crops remain in good shape with ample moisture and no extreme cold weather threats. Scattered precipitation is forecast in the midwest this weekend into early next week. The southwest will also enjoy scattered moisture over the weekend into early next week, helping keep wheat prospects favorable.---Vic Lespinasse

Lower Turn-Around-Tuesday Likely in Grains

A lower start is likely this am in what could prove to be a "turn-a-round Tuesday" session with the market giving back some of yesterday's big gains. The $ index is up while crude oil and the equities markets are lower, a bearish combination for the grains. Prices were mixed overnight but the current call is slightly lower in all pits, 1 in wheat, 3 corn and 5-7 beans.

Deliveries were 1400 in wheat, 900 corn and 200 oil.

Brazil's agricultural minister says a drop of 5% is likely in grain production in the 2008-09 crop year due to tight credit and low crop prices.

ABARE, the Australian version of the USDA, increased their wheat production estimate very slightly, to 19.97 million tonnes vs the 19.91 million estimate in October. This is mildly surprising, given the wet conditions in Australian wheat areas lately that have delayed harvesting and no doubt hurt the quality of the crop. Meteorlogix Weather this am is forecasting more rain in parts of the Australian wheat belt later this week, saying this could further delay harvesting and further hurt the quality of the crop.

The outlook for Brazil calls for widespread rain the next few days in the south with rain in the north the rest of the week. Up to 1.5" could fall in the south by Thursday. All this moisture will be welcome. Somar, the Brazilian weather forecaster, is predicting up to 3.7" of welcome rain in Rio Grande state by tomorrow night and calling for rain in Parana the next 4 days while Mato Grasso will see rain from Thursday through the weekend. Mato Grasso is the biggest Brazilian bean producing state, followed by Parana and Rio Grande. Argentina will see welcome, scattered rain today and tomorrow with mostly dry weather the second half of the week.

Here in the US, the midwest soft red winter wheat crop will benefit from precipitation the last 24 hours with more today and again over the weekend. The southwest hard red winter wheat belt saw up to .75" scattered rain the last 24 hours. More is likely today before a dry second half of the week. The rain overnight and forecast today is welcome.

Keep watching the outside markets for direction in the grains today.---Vic Lespinasse

Higher Outside Markets Boost Grains Start Expectation

A higher to sharply higher start is expected in all pits this am, 15-20 in wheat, 10-15 corn and 20-25 beans. The outside markets are the cause of this much higher start expectation with crude oil and the equity markets very strong while the $ is very weak, a potently bullish combination for the grains. There isn't a lot of other fresh news of consequence.

Deliveries were 2000 wheat and 1000 corn, both to Dec 5 along with 228 oil to Nov 19. There were no big commercial stoppers.

The CRB index fell almost 14% last week, a huge one week decline, which reflects the worldwide economic slowdown and decrease in demand for all commodities, not just grains. The USDA Dec crop production report will be out Thursday but usually this report doesn't have a major impact on the market as many traders prefer to wait for the Jan report, the final crop production report of the season.

More harvest delays are likely in western and southern Australia this week from scattered rain, which could also hurt crop quality. Argentina will benefit from scattered, light rain this week in the north and the next few days in the south. Brazil saw up to .75" of rain over the weekend in the north while the south was dry. Scattered rain is forecast in northern and southern areas this week, which will be very welcome.

The US midwest was mostly dry over the weekend. Precipitation is forecast today and tomorrow over much of the belt, which will delay very late corn harvesting but provide beneficial moisture for the winter wheat crop. The southwest winter wheat belt was generally dry over the weekend but light, scattered precipitation is possible today and tomorrow, which will be welcome, with dry weather again the second half of the week.---Vic Lespinasse

Unemployment Report Likely to Keep Outside Markets Bearish, Pressuring Grains

Different day, same story: Mostly bearish news with crude oil and equities down while the $ index is up. This morning's much worse than expected unemployment report is likely to keep these outside markets in this bearish posture, keeping pressure on the grains. Corn and beans hit 15 month lows yesterday while wheat scored an 18 month low. The Dalian, China grain futures market was sharply lower today, reflecting the economic slowdown there as well as following our prices from yesterday.

Blairo Maggi, the largest bean farmer in the world and the governor of Mato Grasso state, Brazil's largest bean producing state, said at a conference in Washington, DC yesterday that a lack of credit would cut Brazilian bean production in the 2008-09 crop year. This isn't fresh news but it underscores the tough economic times seen around the world currently. Of course, lower bean production is friendly long term for beans but the cause of the lower production, a world wide economic slowdown, is bearish.

Pakistan announced they will be in the market Dec 20 for 500,000 tonnes of optional origin wheat, which is not likely to come from the US as competing wheat is cheaper. The USDA announced this am China bought 110,000 tonnes of US beans for the 2008-09 crop year, the second day in a row China took US beans.

Deliveries were 3000 in wheat to Dec 4, 1500 corn to Dec 4 and 380 oil to Nov 14 with ADM putting out 311 of the oil. The 4 largest commodity index funds, which did so well the last several years until the economic crunch hit, are now down between 31-38% for the first 11 months of the year, compared with the major stock market indices, which are down between 33-42% during this time.

The last several days Rosenthal has bought roughly 20,000 Mar corn calls, mostly 430s and some 420s. Yesterday, they bought around 10,000 Mar 430 calls and the open interest when up 7600, suggesting they are putting on a new position. It is not known what, if anything, they are doing in the futures market since most of this trading is now done electronically rather than in the pit. Rosenthal also sold 17,000 of the May 350 straddle, meaning they sold 17,000 of the May 350 calls and 17,000 of the May 350 puts. The open interest report this am shows a jump of 10,000 in both these strikes this am, suggesting Rosenthal was liquidating a long straddle and putting on a new short straddle.

Goldman Sachs will start moving its long positions out of Jan and into Mar in beans and oil late today and this will continue late every day through Thursday next week, which could put some pressure on Jan in these pits late each session on a spread basis relative to Mar.

Brazil will stay mostly dry the next several days with scattered, welcome rain forecast early next week in the north and later in the week in the south, where up to 1.5" could fall. Argentina will stay dry the next few days but much needed rain is forecast the first half of next week with up to 1.5" predicted. The southwest US will see welcome precipitation early next week. The midwest will see light snow over the next week or so with well below normal temps, causing some late harvest delays for corn in the northwest part of the belt.---Vic Lespinasse

Bearish Factors Prevail Ahead of Grains Opening

A lower start is likely in all pits this am, 3-5 wheat, 1-3 corn and 5-10 beans. Equity and energy markets are lower this am and the $ index is higher, a bearish combination for the grains.

Deliveries were 3300 in wheat and 1650 corn, both to Dec 3. 245 oil was delivered to Nov 6. There was a little commercial stopping in wheat with Bunge taking 59 while JP Morgan took 150, probably for Cargill.

Weekly export sales were on the light side with the exception of meal at 106,000 tonnes. Wheat was only 208,000 tonnes, corn was 387,000 tonnes, beans were 360,000 tonnes and oil was 2700 tonnes.

Stats Canada estimated their all wheat production at 28.6 million tonnes, around 1.6 million tonnes higher than the mid-point of trade ideas. Canola was a record at 12.64 million tonnes - the mid point of trade estimates was only 11.8 million. Oats were less than expected: 4.27 million tonnes vs the mid-point of 4.65 million.

The Census Bureau reported Oct oil stocks at 2.404 billion lbs. 263 million lbs of oil was used to make biodiesel fuel (methyl ester) vs 246 million in Sep and 236 million in Oct 2007.

Morocco is in the market for 300,000 tonnes of optional origin soft red winter wheat but they will likely take non-US origin, either EU or Black Sea. Mexico still is hungry for US corn, taking 115,000 tonnes for this crop year and 10,000 tonnes for next crop year, the third day in a row they bought US corn. The USDA announced this am that China bought 174,000 tonnes of US beans for the 2008-09 crop year, confirming yesterday's talk that China was in the market for beans. China confirmed widespread talk they will continue to build state reserves by buying 7.5 million tonnes of rice, 5 million tonnes of corn and 1.5 million tonnes of beans on top of already announced intentions to buy similar amounts for state reserves. This announcement is already in the market so it shouldn't have much impact on prices.

Argentina will see mostly dry weather today through Sunday with light rain possible early next week, which is needed. Brazil will remain mostly dry the next few days with rain possible in the north Sun-Tue and in the south Mon-Tue, which will be welcome. West Australia is the largest wheat producing state in the country. Their Department of Agriculture and Food said today that harvesting has been delayed and quality hurt by too much rain, the same problem for wheat in eastern Australian wheat states.

Light precipitation was seen in the US midwest yesterday. Mostly dry weather is likely today through Sunday with precipitation possible early next week. The east will be dry the next couple of days with snow expected Saturday and again early next week. This moisture could delay late corn harvesting in the northwest quarter of the belt next week. ---Vic Lespinasse

Overnight Losses Indicate Lower Grains Start

A slightly lower start is the early indication, based on small overnight losses in most pits, the higher $ index and lower equity markets. Crude oil was slightly lower earlier but it is a little higher now, not giving much direction to the grains. If the outside markets move substantially between now and the grains opening, they could change the opening call so keep an eye on them.

Stats Canada will put out updated production estimates tomorrow am. I should have trade estimates later today for this report. Currently, I am hearing the numbers will generally be larger than the early Oct estimates from Stats Canada.

Mexico bought 120,000 tonnes of US corn for the 2008-09 crop year, according to the USDA this am. Deliveries remain large in wheat this am at 3500 lots to Dec 2, and in corn at 2000 to Dec 1. Oil was 600 to Nov 5 and there were 2 meal deliveries. Once again, there were no big commercial stoppers of any of the deliveries.

Some harvest delaying rain is forecast in parts of the Australian wheat belt the next couple of days. According to some estimates, harvesting is as much as 1 month behind normal due to the wet weather with further quality losses possible as a result. Argentine grain areas are forecast to stay mostly dry the rest of this week into early next although there might be some scattered, light rain in southern growing areas tomorrow and Friday. More rain will be needed again soon to keep corn and bean prospects favorable. Scattered, light rain fell in Brazilian growing areas the last 24 hours. Most of these regions will be on the dry side today through the weekend, increasing the need for rain there soon.

The US midwest will see snow or rain scattered across the belt today, followed by mostly dry weather the following couple of days. More precipitation is forecast early next week. This could further delay late corn harvesting in the northwest quarter of the belt, where roughly 10% of the crop remains in the field.---Vic Lespinasse

Yesterday's Bearish Indicators Turn Bullish for Grains Today

A mostly higher start is likely this am, roughly 5 in wheat and 3-4 in beans with corn steady to 1 better. Yesterday's bearish indicators are this morning's bullish ones with crude oil and equity markets up while the $ index is lower. We could have a "turn-a-round Tuesday" type trade today where the market reverses course from Monday.

Deliveries remain heavy in wheat with 3700 to Dec 1, corn at 1850 to Nov 26 and oil at 2300 to Oct 31. ADM put out 2000 of the oil. There were no large commercial stoppers in any of the markets. Two meal were delivered this am with the date Aug 28.

Egypt is in the market for optional origin wheat this am with results due shortly before our opening. Last week Egypt bought 1 cargo, 55,000 tonnes of US wheat and they could opt for more US origin today, which would lend support to our market, especially if they took several cargoes. The USDA announced this am that Mexico bought 330,000 tonnes of US corn: 210,000 tonnes for this crop year and 120,000 tonnes for 2009-10, the next crop year.

Mostly dry weather is forecast for the main Australian wheat areas the rest of this week, allowing rain delayed harvesting to pick up. Brazil expects scattered rain the next couple of days, which will be welcome. Up to 1" is forecast in the north with up to 3/4" forecast in the south before dry weather moves across the country starting Thursday. Argentina will stay mostly dry this week although some light rain is forecast in southern growing areas Thursday. Weekend rains were very beneficial for the crops in Argentina but it takes more than one rain to make a crop so more rain will still be needed over coming weeks and months to ensure a sizeable crop.
The US southwest winter wheat belt will see scattered, light precipitation the second half of the week, which will be welcome.

Traders will watch for the Egyptian wheat results this am as well as continue watching the outside markets for direction in the grains.

Rain in Argentina and Outside Markets Point Grains Lower

A lower start is indicated across the floor this am: Around 12-15 off in wheat, 5-7 down in corn and 15 lower in beans. All the outside markets point lower this am with equities and energy markets down while the $ index is higher.

3600 wheat was delivered this am along with 1600 corn but only 38 oil and no meal. The delivery dates were Nov 28 for wheat, Nov 21 for corn and Sep 30 for oil. There were no big commercial stoppers of these deliveries.

Xinhua, China's official news agency, is quoting the deputy head of the National Development and Reform Commission today as saying China will enjoy another record grain harvest this year, a whopping 525 million tonnes compared with only around 510 million tonnes last year. He also said next year production is likely to be lower due to much lower prices. More crushing plants in Heilongjiang province, China's largest bean producing province, have shut down for now since they can't compete for beans with the government, who is paying much higher prices in an attempt to build state reserves. There is growing talk these crushers might have to import beans to secure supplies - like carrying coals to Newcastle!

Roughly 1 million tonnes of milling grade Australian wheat has been downgraded to feed quality due to recent heavy rains in eastern Australia, especially New South Wales.

Widespread, much needed rain fell over the weekend in dry Argentine grain areas with some provinces such as Cordoba, getting up to 1.5". Cordoba is Argentina's largest bean producing province. The rain favored northern areas but it fell in the south also. Mostly dry weather is forecast this week but light rain is likely early next week. Brazil saw up to .75" of scattered rain over the weekend. More is forecast in the north the next couple of days but mostly dry weather is likely this week in the south, which could use more moisture soon.

The southwest US winter wheat belt saw rain in the east over the weekend and more is likely the second half of this week. Rain and snow fell in the corn belt over the weekend, slowing late corn harvesting. Mostly dry weather is forecast this week in the west while scattered precipitation is likely in the east again today and mid week, followed by dry weather later in the week. The weekend rain in Argentina contributed to the overnight losses in the grains this am.---Vic Lespinasse