Mixed Grains Start is Indicated But Higher Crude May Lend Support

A mixed start is indicated this am, roughly steady/easier wheat, 2-3 lower corn and 2-3 higher beans. Crude oil is higher, a supportive influence for the grains, but the $ index is a bit higher, which is negative for the grains.

There is a rumor that China is going to release 500,000 tonnes of beans from its reserves to domestic crushers. This would mean these crushers would import 500,000 tonnes less beans, which would be bearish for US bean export prospects to China. The Brazilian government will put out crop production guesses Feb 5. Egypt bought 120,000 tonnes of French wheat and 60,000 tonnes of US soft red winter wheat today.

Argentina will stay dry today through Sunday but .25-1" of much needed rain will occur Mon-Tue with 55% coverage before dry weather returns the second half of next week, according to Meteorlogix Weather. Brazil enjoyed up to .5" of rain in Parana state yesterday and up to 1" in Mato Grasso state, the two largest bean growing states in the country. Southern Brazil will be dry today through Tuesday with rain of .3-1.5" expected Wed-Thur. Northern Mato Grasso will see scattered rain the next 7 days with up to 1" the next 3 days alone. Southern Mato Grasso will be dry through Monday with scattered rain mid next week.

The dry southwest part of the US southwest winter wheat belt will stay this way the next 7 days. ---Vic Lespinasse

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Mixed Outside Signals May Open Grains Lower

A lower start is indicated in all pits, around 8-10 wheat and 5-7 corn and beans. Crude oil is lower this am but so is the $, sending mixed signals to the grains.

Weekly export sales were extremely poor for wheat at just 21,000 tonnes. Corn was good at 1.107 million tonnes but beans were slow at only 526,000 tonnes. Product sales were good with 202,000 tonnes of meal and 21,500 tonnes of oil.

The Census Bureau Dec crush was about as expected at 141.4 million bushels. Oil stocks were about 40 million lbs less than expected at 2.657 billion lbs while meal stocks were about as expected at 415,000 short tons.

South Korea bought 110,000 tonnes of US corn but passed on 220,000 tonnes due to high prices. Pakistan delayed its tender for 250,000 tonnes of US white wheat a third time, now set for Feb 7.

Argentina will be mostly dry today through Sunday. Up to 1" of much needed rain is forecast Mon-Tue but hot and dry weather is expected again Wed-Sat next week, keeping crops under extreme stress. This is Meteorlogix forecast but others, such as Frese-Notis, see several chances for rain next week and the lower prices overnight suggest the market is going with this wetter view. Brazilian weather remains generally favorable with up to 1" of welcome rain overnight in Mato Grasso state and up to .6" elsewhere. More scattered rain is forecast in Mato Grasso the next several days. Rain is also forecast in southern Brazil, especially Parana, today and tomorrow, before dry weather returns Saturday.

Continued dry conditions in the southwest part of the southwest US winter wheat belt the next 7 days but there is a chance of much needed moisture after that.---Vic Lespinasse

Argentine Weather May Trump Outside Markets at Grains Open

A lower start is indicated this am, down roughly 2-4 in wheat, 3-5 corn and 7-10 beans following similar overnight losses. The outside markets are a bit friendly for the grains this am with crude oil and the equity markets higher, especially equities, while the $ is lower. However, the market is mainly focused on Argentine weather, which appears to be improving and this is likely to outweigh the friendly influence of the outside markets.

South Korea is in for 330,000 tonnes of optional origin corn today but no results are out yet. There is still no confirmation from the Argentine government that they have halted wheat exports but that is the way the wheat market continues to act, remaining strong relative to corn and beans.

Brazil bean and corn fields will enjoy scattered rain in the north the next few days. The south will see up to 1.5" of scattered rain today and tomorrow then turn drier for several days. Argentina benefited from up to 1" scattered rain in Cordoba and Santa Fe overnight but mostly dry weather was seen elsewhere, such as in Buenos Aires province. It will be mostly dry today through Friday. Up to 1.5" of scattered, welcome rain is forecast in Cordoba over the weekend into early next week. Elsewhere, up to .75" of light, scattered rain is forecast over the weekend. Coverage is expected to range from 40-70%, best in Cordoba. More much needed rain is forecast mid next week.

Dry weather is expected to continue in the southwest part of the southwest winter wheat belt the next 10 days, stressing the crop. This isn't a major concern now but if this dry pattern continues into spring, when the wheat comes out of dormancy, it would hurt the crop and be bullish for prices.---Vic Lespinasse

Lower Grains Start Expected with Outside Markets Steady to Mixed

A steady to slightly lower start is expected this am, unchanged in wheat, 3-5 down in corn and 1 lower in beans. Chinese markets remain closed until next week due to their lunar new year holiday. Crude oil is a little lower and the $ index is steady/mixed, not providing much direction for our grain market.

Argentine President Fernandez declared an agricultural emergency due to the severe drought conditions afflicting much of the country, reflecting how serious the situation is there. Oil World, the widely-followed analytical firm, cut their Argentine bean guess to 44 million tonnes from 48.8 million previously. They trimmed their Brazilian bean crop guess to 57.5 million tonnes vs 59 before. Many analysts think the Argentine bean crop is much smaller still, perhaps as low as 35 million. However, it is the equivalent of late July in Argentina so weather over the next several weeks could still improve the outlook for the bean crop significantly, if the rain comes. Right now, this is a big if.

Light, scattered rain fell in the Cordoba and Santa Fe provinces of Argentina overnight and more is forecast today before dry weather returns the second half of the week. More rain is forecast in Cordoba this weekend and significant amounts of rain are expected early next week, which would be very welcome. Up to 1" of welcome rain fell in Brazilian bean areas overnight with the exception of Rio Grande state. Widespread rain is likely in the southern part of the country the next 3 days before dry weather returns for the weekend. Scattered, welcome rain is likely in the north the next few days as well.---Vic Lespinasse

Higher Grains Start Expected Despite Lack of Fresh News

A higher start is expected in all pits, roughly 10-15 wheat, 5-10 corn and 15-18 beans, following big overnight gains. The market had wide ranges overnight and finished the session near its highs for the night, suggesting followthrough support this am. China is on its annual lunar new year's holiday all week so we won't get any imput from them during this time. The $ index is lower this am but so is crude oil, sending mixed signals to our grain market. There is little fresh news this am to drive prices very far in either direction outside of the weather.

It wasn't cold enough over the weekend to cause any damage in the winter wheat regions of the North China Plain. Somar, the widely-followed Brazilian weather forecaster, says moderate amounts of rain fell over the weekend in northern Brazil and this week up to 5" could fall there, which will be welcome. Moderate rain is forecast in the south later this week, where it will be very welcome. Argentina saw up to 1" of much needed rain over the weekend with 65% coverage, favoring eastern Cordoba and southern Santa Fe, two of Argentina's main growing regions. Very hot temps were seen Fri-Sat. Up to .5" of welcome rain is forecast in parts of Cordoba and Santa Fe tomorrow with dry weather the second half of the week and very high temps. Scattered rain is forecast again in Cordoba and Santa Fe this weekend but Buneos Aires province, another main grain region, is forecast to remain dry this week. Sunday-Wednesday next week is forecast to be dry and very hot.

The US southwest winter wheat belt is too dry in the southern and west-central parts of the belt with no rain forecast the next 10 days. This is only a minor concern now as the crop is dormant.---Vic Lespinasse

Bearish Outside Influences Augur Lower Grains Start

A slightly lower start is likely this am, down roughly 5 in wheat and corn, off 5-10 in beans. The $ index is higher while crude oil and the equity markets are lower this am, a bearish combination for the grains.

Weekly export sales were in line for oil at 7400 tonnes, but all the rest were good, especially corn at 1.086 million tonnes, beans at 1.325 million tonnes, and meal at 211,000 tonnes, along with 410,000 tonnes of wheat. South Korea bought 55,000 tonnes each of US and Brazilian corn. This, as well as the big weekly export sales number for corn, indicates US corn is competitive once again in the export market, which is supportive for prices. Over half the weekly bean export sales were to China again this week at 766,000 tonnes, demonstrating again how dependent US bean export prosperity is on Chinese demand. China's lunar new year holiday starts Monday and lasts about a week, during which time China will be absent from our bean market. Starting sometime in Mar, Chinese bean demand will switch to South America as Brazilian and Argentine beans become available in larger quantities as the South American harvest progresses.

The USDA announced this am that China bought 145,000 tonnes of US beans and Japan took 103,000 of US corn, both for the 2008-09 crop year. However, Nigeria cancelled a total of 356,000 tonnes of US hard red winter wheat for the 2008-09 and 2009-10 crop years. I don't have the breakdown of how much was for each crop year at this time.

Argentina will remain hot and dry until Sun-Mon, when up to 1" with 55% coverege is forecast. Hot and dry weather is forecast to return Tue-Thur but there is a chance of rain again next Fri-Sat, which is badly needed. Southern Brazil will stay dry through Sunday. Significant, widespread rain is forecast in Parana state the first half of next week but there is less chance of beneficial rain then in Rio Grande state. Northern Brazil will see good, possibly heavy, rain the next 5 days, keeping conditions there in good shape.

The threat to winter wheat in northern parts of the North China Plain that don't have adequate snowcover still exists for today through Sunday with very cold temps still forecast.---Vic Lespinasse

Higher Grains Start Likely with Overnight Gains

A slightly higher start is likely this am, around 3 in wheat, 2 in corn and 5 in beans, similar to overnight gains. Crude oil is a little lower while the $ index is a bit higher, a negative combination for the grains.

Pakistan again postponed its tender for 250,000 tonnes of US white wheat, this time to Jan 31. China's National Bureau of Statistics confirmed record grain production for 2008, 528.5 million tonnes.

Yesterday, Rosenthal ended up buying 3500 of the May corn $3.50 straddle (buying both May 3.50 calls and puts) as well as buying 3500 of the Mar 4.30 puts. This was the second day in a row Rosenthal was featured in these trades for large amounts. It is thought they are liquidating these positions.

Supposedly, the USDA attache in Argentina will conduct a crop survey next week to determine the extent of the damage to corn and beans from the ongoing hot and dry weather. The results of this survey will supposedly be released at the end of the month, well ahead of the next scheduled USDA Argentine crop estimate on Feb 10.

There is still a threat to the wheat crop from very cold temps in northern parts of the North China Plain Fri-Sat for areas that don't have adequate snow cover. Argentine corn and bean areas were hot and dry the last 24 hours. More of the same is forecast today through Saturday but up to 1" of much needed rain is forecast Sunday. More dry weather is forecast all next week with temps heating up again the second half of the week. This forecast, if correct, will further stress the already severely-stressed crops. Brazil will see mostly dry weather in the north today through Saturday but welcome rain is forecast Sun-Tue. Scattered rain is forecast in the south today and tomorrow with more widespread rain forecast Sun-Tue, which will be welcome. ---Vic Lespinasse

Mixed Start Projected for Grains with Lack of Fresh News

A mixed start is likely this am, tentatively up 4-5 in wheat, down 2-4 in corn and down 3-5 in beans. There isn't a lot of fresh news this am.

Egypt is in the market for optional origin wheat with results expected shortly before our opening. The wheat opening will depend, in part, on how much if any US wheat Egypt buys.The $ is a little lower and crude oil is mixed, which could lend modest early support to the grain market.

VeraSun, the second largest ethanol maker in the US, announced 12 of their 16 ethanol plants are shut for now due to a lack of credit amid poor market conditions. This comes as no surprise since the company is already in bankruptcy but it reflects the very tough market conditions for ethanol, which doesn't auger well for corn demand to make the alternative fuel.

Very hot temps and dry conditions will continue in most Argentine corn and bean areas until Sunday, when scattered showers of up to 3/4" are forecast. This modest rain event will be followed with very hot and dry weather most of next week, further stressing the already severely stressed crops. Brazil was mostly dry the last 24 hours and more of the same is forecast through Friday. Light, scattered rain will fall over the weekend, favoring Parana. More rain would be welcome.

There is a cold weather threat to wheat lacking adequate snowcover in the North China Plain Fri-Sat.

A Mixed Grains Open Projected on US Presidential Inauguration Day

The early call is mixed, steady wheat, 6-8 higher corn and 1-2 lower beans. Crude oil is lower while the $ index is higher, a bearish combination for the grains. Malaysian palm oil was 32 ringgit lower and Dalian, China grain futures were lower today, negative background influences for our grain market.

Trading mid morning could slow as traders take time out to watch Barack Obama's inauguration.

India is considering allowing wheat exports again and a decision could come as early as today, according to their Farm Minister. The Chinese Lunar New Year starts Jan 26 and lasts over one week, during which time China is likely to be absent from our bean market. They are by far the largest buyer of US bean exports so their absence will be sorely missed.

Weekend rains in Argentina were up to .75" with about 55% coverage, favoring Cordoba and Santa Fe. It will be mostly hot and dry today through Saturday with scattered rain possible Sunday. Brazil had widespread, beneficial rain over the weekend, up to 1.5" in Rio Grande, up to 3" in Parana and up to 2.5" in Mato Grasso. It will be mostly dry today through Sunday, however.

Only minor damage, if any, was done to the soft red winter wheat crop in the midwest from very cold temps last week in non-snow covered areas, according to Meteorlogix Weather.---Vic Lespinasse

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Grains Poised to End Week on a High Note

A higher start is expected in all pits this am, roughly 5-10 wheat, 7-10 corn and 15 beans. Crude oil is a little higher and the $ is lower this am, a bullish combination for the grains, which were higher overnight.

The USDA announced the sale of 116,000 tonnes of US beans to China and the sale of 125,000 tonnes of US beans to an unknown destination, which is very likely also China. China will start their lunar new year holiday Jan 26 so they are probably stocking up on beans ahead of this.

The Argentine government confirmed recent rumors that they were going to allow an additional 1.2 million tonnes of wheat to be exported, which is negative for US wheat export prospects. The main influence on beans again today is likely to be hot and dry weather in Argentina and the rest of the grains could be influenced, in turn, by beans. Keep watching beans for guidance in the other grains.

There is talk drought in the wheat growing areas of China could cut production by up to 5%, at most.

Dry weather will continue in Argentine corn and bean areas today with rain of .25-.75" and 35% coverage forecast over the weekend. Hot and dry weather is forecast to return most of next week, increasing stress for the crops. Corn is especially vulnerable as it is going through pollination, its most weather sensitive stage currently. Beans will go through their most weather sensitive stage next month, setting pods. It was mostly dry in southern Brazil yesterday but up to 1" of welcome rain fell in the north. It will be dry in southern Brazil (Rio Grande) the next week or so but Parana will see up to 1.5" beneficial rain today through Sunday followed by mostly dry weather next week. Mato Grasso, the biggest bean growing state in Brazil and in the northern part of the bean belt will see up to 2" scattered rain today-Tuesday, keeping conditions there favorable.

Only minor winter kill is expected by Meteorlogix Weather in the southern midwest soft red winter wheat belt with extremely cold temps lingering there one more day. No winter kill threat is seen in the southwest winter wheat belt.

Informa will be out at 10:30am US Central time with their 2009 US corn and bean acreage guesses.

Outside Markets, Overnight Trading Mixed Ahead of Grains Opening

A mixed start is expected this am, similar to overnight trading. The early call is 2-4 lower wheat, 1-3 down in corn and up 7-10 in beans. Crude oil is mixed this am while the $ index is just a shade lower, not enough to influence the grains much either way.

Weekly export sales were slow for wheat, only 88,000 tonnes this crop year and 80,000 tonnes next crop year. Corn sales were also slow, just 216,000 tonnes, continuing the very slow export sales pace in this market seen so far this marketing year, which started Sep 1. Bean export sales were very good, 1.361 million tonnes, including 862,000 tonnes sold to China. Meal sales were at the high end of trade ideas, 74,000 tonnes. Oil sales were higher than expected, 17,000 tonnes.

There is a rumor Argentina is going to allow 1.2 million tonnes of additional wheat exports on top of the 926,000 tonnes the government authorized for export back in Nov. If true, this would be bearish for US wheat export prospects, especially since our wheat is already too high-priced vs other origins. Japan did buy 90,000 tonnes of US wheat, however, at their regular weekly tender. India's farm minister said India will review their wheat export ban in March, hinting they will return to the wheat export market. India just harvested a record wheat crop and early signs suggest another large wheat crop this year, providing them with an exportable surplus.

The very cold temps in much of the US are supportive for feed demand, corn and meal, as livestock need to eat more to maintain normal body temps in the cold.

Argentina will remain mostly hot and dry today. Scattered rain is forecast this weekend, up to .75" with 35% coverage. Hot and dry weather is forecast again the first half of next week, which will further stress corn and beans, especially corn, which is going through its most weather sensitive stage, pollination. Brazil saw up to 1" of rain in Parana yesterday but the rest of the country was mostly dry. Rio Grande will stay dry today through Saturday with scattered rain Sun-Mon and dry weather again Tue-Wed. Parana will enjoy scattered rain today through Monday, up to 1.5", with dry weather Tue-Wed. Mato Grasso will see beneficial scattered rain the next 5-7 days with up to 1.5" the next 3 days alone. Mato Grasso is the largest bean growing state in Brazil, Parana the second largest and Rio Grande the third largest.Parana is also the largest corn growing state in the country.

According to this morning's Meteorlogix Weather outlook, there is little risk of any cold weather damage in the southwest winter wheat belt from the current cold spell. The midwest winter wheat crop could see minor damage from the extreme cold in the southern part of the belt, where snowcover is lacking.---Vic Lespinasse

Higher Start Likely Following Overnight Gains in Grains

A higher start is likely this am following overnight gains, roughly 4-5 in wheat, 3-5 corn and 15 in beans. Crude oil is lower and the $ a little higher, a negative combination for the grains. However, dry weather worries in South America, especially Argentina, are likely to trump all other market considerations, at least initially this am.

The National Oilseed Processors Association Dec crush was much less than expected, just 134.8 million tonnes, and oil stocks were much higher than expected at 2.176 billion lbs.

Brazilian analyst AgraFNP cut its Brazilian bean and corn production estimates to 57.85 million tonnes and 48.4 million tonnes, respectively. Last month they guessed these crops at 59.2 million tonnes for beans and 52.2 million tonnes for corn. Dry weather in southern Brazil during Dec was blamed for the drop in production. The weather was damaging last month in southern Brazil but so far this month the weather is much improved and a recovery in the outlook for crop production is probable if the weather continues favorably the next several weeks. Argentine grain production is still falling due to ongoing hot and dry weather. However, Argentine farmers are holding millions of tonnes more beans than usual at this time of year so they will be able to keep the bean market well supplied even if production continues falling.

Argentina will remain mostly hot and dry the rest of the week with scattered rain of up to .75" forecast this weekend. Mostly hot and dry weather is forecast to return much of next week. Brazil saw up to 1.5" of welcome rain in the south yesterday and up to another 1.5" more is likely the rest of this week. Northern growing areas will also benefit from 1.5" or more rain the rest of the week, continuing into next week.

According to Meteorlogix Weather, there is little threat of cold weather damage in the southwest winter wheat belt. There is some chance of damage in the midwest winter wheat belt, however, where snowcover is lacking in some areas. Other forecasters, which I mentioned yesterday, think up to half the midwestern crop and up to 1/3 the southwestern crop is in danger of winterkill from the very cold temps forecast the next several days. It is too early to say for sure one way or the other at this time.---Vic Lespinasse

Grain Losses Continue Overnight; Mixed Start Expected

A mixed start is indicated by overnight trading this am with wheat called 2-3 lower, corn off 5-10 and beans up 3-5. Crude oil is slightly lower while the $ is higher, a bearish combination for the grains. Dalian, China grain prices were sharply lower today, following our big sell off yesterday and Malaysian palm oil futures fell 158 ringgit today. We have expanded limits in all the grains today except oil and oats. Wheat will have a 90 cent limit, corn 45 cents, beans $1.05 and meal $30, all due to yesterday's limit losses.

Egypt is in the market for optional origin wheat this am but they probably won't buy US origin as it is too high priced vs other origins, such as the Black Sea. Saudi Arabia bought at least 385,000 tonnes of Canadian wheat on their tender for 500,000 tonnes.

I haven't seen it but for what it's worth, Goldman Sachs reportedly told clients wheat will trade up to $7.70 and corn up to $5 within the next 12 months.

Hot and dry weather will continue to stress corn and beans in most Argentine growing areas until the weekend, when light, scattered rain of up to .75" is forecast, mainly in Cordoba and northwest Buenos Aires provinces. Much more rain will be needed again soon in these provinces, two of the main grain growing areas in Argentina. Brazil will benefit from up to 1" of rain in the south today with up to .75" more expected in Parana the rest of the week. Additional rain is forecast in Rio Grande state early next week. Mato Grasso, the largest Brazilian bean growing state, will see up to 1.5" of rain Thur-Mon. Overall, conditions continue favorably in Brazil, especially the north, while weather worries persist in most of Argentina. The bean market is responding to the weather threat in Argentina so that is the place to keep watching.

There is no cold weather threat for the southwest winter wheat belt the next several days. Very cold temps will threaten soft red winter wheat in the southern midwest the next few days where snowcover is light or missing. ---Vic Lespinasse

USDA Report Figures Mostly Bearish

A lower start is expected in all pits following the mostly bearish USDA reports this am. The early, tentative call is 5-10 lower in wheat and corn, 10-15 down in beans. Crude oil is lower and the $ is higher this am, a bearish combination for the grains.

Winter wheat acreage estimates were one of the few bullish areas with total winter wheat acreage estimated at 42.1 million acres, over 2 million acres less than expected. Hard red winter was 30.2 million, soft red winter 8.3 million and white winter 3.6 million. Hard and soft red were each about 1 million acres less than expected. Final 2008 production estimates were 12.101 billion bushels for corn, about 120 million bushels higher than expected, and 2.959 billion bushels for beans, about 50 million higher than expected. December 1st grain stocks were put at 10.084 billion bushels for corn, roughly 240 million bushels higher than trade ideas. Beans were 2.276 billion bushels, about 95 million bushels higher than expected. Wheat stocks were 1.422 billion bushels, about 55 million higher than expected. Ending stocks were guessed at 225 million bushels for beans vs trade ideas of only 187 million; corn ending stocks were put at 1.790 billion bushels, fully 300 million higher than trade estimates. Wheat ending stocks were guessed at 655 million bushels, about 55 million above trade ideas. Oil ending stocks came in at 2.143 billion lbs, 110 million lbs higher than predicted by the USDA last month.

World ending stocks were put at 148.4 million tonnes for wheat, up 1 million tonnes from last month's estimate. World corn ending stocks were 136 million tonnes vs only 123.8 million last month and world bean ending stocks were 53.9 million tonnes against 54.2 million last month. The USDA cut the amount of corn they think will be used to produce ethanol this crop year from 3.7 billion bushels to 3.6 billion but they left their guess on the amount of bean oil to be used to make biodiesel fuel this crop year unchanged from last month at 3.1 billion lbs. The USDA cut their US corn export guess for this crop year to 1.750 billion bushels from 1.800 billion. They increased their bean export guess to 1.100 billion bushels from 1.050 billion. They left their China bean import guess unchanged at 36 million tonnes. The USDA hiked their guess on China's corn crop to 165.5 million tonnes. They cut their Argentine corn crop guess to 16.5 million tonnes from 18 million due to ongoing poor weather. Their Argentine bean crop guess was also cut, down 1 million tonnes to 49.5 million. Their Argentine wheat crop guess was cut 1million tonnes to 9.5 million, also due to poor weather. The USDA Brazilian bean guess was left unchanged at 59 million tonnes.

China announced plans to buy an additional 3 million tonnes of domestically produced beans to build state reserves and help support farmers income. This is bullish for US bean export prospects to China since farmers will sell most of their beans to the government, which pays higher prices, leaving crushers more dependent on imports to meet crushing needs. Indeed, the USDA announced this am that China bought 399,000 tonnes of US beans, good news for the bulls on a mostly bearish news morning. Pakistan extended the date of their tender for 250,000 tonnes of US wheat from Jan 10 to Jan 24.

Argentina continued hot and dry in most areas over the weekend and more of the same punishing weather is forecast there this week, continuing to stress corn and beans. Corn is especially vulnerable now as it is going through its most weather sensitive stage, pollination. There is some very light, scattered rain in sight this week but not enough to offset the heat. Brazil saw up to 1" beneficial rain over the weekend in the south. Up to 1.5" more is forecast in the south the first half of this weekand while even more rain is forecast the second half of the week. Mato Grasso in the north is forecast to get up to 1.5" of rain the second half of the week after a few dry days the first half of the week. All this is according to Meteorlogix Weather. Somar, the widely-followed Brazilian forecaster, reported widespread rains of 2-4" in Mato Grasso over the past week. They said Parana had up to 3/4" of rain over the weekend with 1/2" in parts of Rio Grande. More widespread rain is forecast in Brazil this week, according to Somar. The hot and dry weather is reducing the bean and corn crops in Argentina currently but the favorably wet weather in Brazil is likely boosting, or at least maintaining, crop prospects there.

There is no cold temperature threat for the hard red winter wheat belt in the southwest US. Temps will be very cold in the soft red winter wheat belt of the midwest this week but there is some protective snowcover so any damage should be limited.---Vic Lespinasse

Click here to review the full USDA production report.

South American Weather May Push Grains Open Higher

A higher to sharply higher start is expected in most pits this am following big overnight gains. Crude oil is a little higher but so is the $, sending mixed signals to the grain market. The early call is 5-10 higher wheat, 5-7 up in corn and 25-30 better in beans.

The reason for the expected higher start? The hot and dry forecast for Argentina today through Sunday of next week! Yesterday, there was much needed rain in the forecast for Argentina early next week but today there is very little and hot temps are expected to accompany this dry spell.This will further stress the already stressed corn and bean crops in Argentina. Blame it on La Nina, a Pacific Ocean weather condition that is associated with dry weather in Argentina and southern Brazil. The longer this adverse weather condition lasts, the higher our markets are likely to go, even if crude oil continues to sell off and the $ rallies further. Brazil is in relatively good shape weather wise, compared with Argentina. Up to 1.25" of rain fell in parts of southern Brazil yesterday with light, scattered rain in northern Brazil. Between today and tomorrow, up to 1.5" of additional rain is forecast for Rio Grande and Parana states in Brazil, the 3rd and 2nd largest bean growing states, respectively. More rain is forecast for Parana the first half of next week while Mato Grasso, the largest bean state in Brazil, is forecast to get more rain the second half of next week. All this moisture is welcome. The problem is that if Argentine bean production is severely cut, more bean export demand will come to the US and Brazil.

Last month the USDA put the US bean carryover at only 205 million bushels and the trade is looking for a figure of just 187 million in Monday morning's report. This is a very tight carryover and, with China buying US beans at a very healthy pace, any increase in export demand will have a very bullish impact on prices. It is the equivalant of July 9 in South America now so the weather is nearing its critical stage and the market will be very sensitive to any threat.

Mar beans are back over the important $10 mark and a close over this level would be technically bullish.

There is now a cold weather threat for wheat in the midwest next week as well as in the eastern part of the southwest. Temps could fall well below 0 in parts of these belts and if snow cover is lacking, damage to the wheat crop is likely. ---Vic Lespinasse

Overnight Grains Losses May Find Support from Steady Crude

A lower start is expected following lower overnight prices with wheat called 10 lower, corn 6-7 weaker and beans off 5-7. Crude oil is steady this am while the $ is lower, which could provide at least a little support for the grains. Remember, index funds will start adjusting their positions today and continue through the next several days.

Weekly export sales were very poor for wheat, just 42,000 tonnes. Corn continues at a slow pace, only 261,000 tonnes while meal was terrible at just 20,000 tonnes. Oil sales were in line at 3600 tonnes while bean sales were good at 530,000 tonnes.

Egypt bought 56,000 tonnes of Russian wheat but nothing from the US. The USDA announced this am the sale of 120,000 tonnes of US beans to China.

The China National Grain and Oilseed Information Center (CNGOIC) a Chinese government-linked think tank, upped their corn production guess for 2008 to a record 165.5 million tonnes vs 156 previously. They left their bean guess unchanged at 16.5 million tonnes. The USDA will put out their world production guesses Monday am and they often follow CNGOIC when it comes to Chinese estimates. The USDA attache in Argentina cut his Argentine wheat production guess to 9.5 million tonnes vs 11 million tonnes previously due to adverse weather. The corn crop guess was cut to 16.5 million tonnes vs 18 million previously for the same reason. The USDA sometimes follows their attache's estimates but just as often they don't so we will have to wait until Monday am to see the official USDA Argentine estimates. Japan bought 106,000 tonnes of US wheat at their weekly tender. Conab, a branch of the Brazilian Agricultural Ministry, cut their bean crop estimate to 57.8 million tonnes vs 58.8 million last month due to dry weather in some areas. They cut their corn guess to 52.3 million tonnes vs 54.4 million previously for the same reason. Last year, Brazil produced 60 million tonnes of beans and 58.7 million tonnes of corn.

The Census Bureau reported 248 million lbs of bean oil were used to make biodiesel fuel in Nov vs 263 million in Oct and 223 million in Nov last year.

ADN stopped 76 of the 77 bean on delivery this am, supportive for the Jan/Mar bean spread.

Informa will finally put out its US crop production guesses this am at 10:30am US Central time.

Brazil will benefit from light rain in the south tomorrow or Saturday but dry weather will be in place elsewhere the next several days. More rain is possible in the south early next week with continued dry weather elsewhere. Welcome rain is possible in Parana and Mato Grasso next week. The forecast for Argentina is drier again compared with yesterday's outlook. Dry weather was the rule yesterday and more of the same is forecast today through Sunday before up to .75" falls Monday. Dry weather is then expected to return Tue-Sat next week, keeping most fields too dry, especially since above normal temps are also forecast to return next week.

There is no cold weather threat for the southwest winter wheat belt the next 7 days but the midwest will be very cold starting about Tuesday, which could cause some winter kill damage to the soft red winter wheat crop if snow cover is lacking.---Vic Lespinasse

Mixed Outside Signals Plus Overnight Losses Drag on Yesterday's Grain Gains

A lower start is expected in all pits following overnight losses, 6-8 wheat and beans, 3-5 corn. The outside markets are mixed this am. The $ is much weaker, which is supportive for the grains, but crude oil is slightly lower, a negative influence for the grains.

All the grains have rallied sharply since bottoming out on December 5. Mar beans, for example, closed that day around $7.85 and ended yesterday at $10.16, a rally of about $1.30 without any significant setbacks in just over 1 month. We have been long since the close of Dec 6. We were trading January at that time but Mar ended that day around $8.25. Some traders think the market is overbought and overdue for a technical correction. They might well be right but I am not going to try to pick a top, preferring to wait for the charts to signal prices have topped, just as they signaled the market had bottomed right after Dec 5.

ADN stopped 411 of the 413 beans on delivery this am, which is friendly for the Jan/Mar bean spread. China supposedly sold 150,000 tonnes of bean oil from its reserves into the domestic market. They are replacing it with imports from South America, buying 50-60,000 tonnes already, according to traders in China. Nonghyup Feed, a major South Korean feed processor, said they are going to cut corn imports by about 20% and increase feed wheat imports, which are much cheaper. South Korea is one of the biggest US corn export customers. Corn export demand has been very slow so far this season with exports way behind last year and the projected USDA export pace. This could further slow US corn export demand, which is negative for our corn market, of course.

According to media reports, the two largest index funds will start rebalancing their positions Thurs-Fri and finish in about a week. They are expected to buy crude oil, wheat and bean oil. One of the funds is expected to also buy corn and beans but the other is expected to sell corn and beans.

Argentina is forecast to get up to .75" in Cordoba and Santa Fe provinces today and tomorrow. These provinces, along with Buenos Aires province, are the 3 main grain growing provinces in the country. They all need rain badly. Dry weather is forecast for the entire country Fri-Sun but rain and cooler temps are forecast next week, which is badly needed. Brazil was dry the last 24 hours and more of the same is likely today through Friday. Rain is likely in the south (Rio Grande) Fri-Sat but dry weather is forecast to continue elsewhere. The 6-10 day calls for a high pressure ridge to set up over Parana state, keeping conditions there hot and dry but more rain is forecast for Rio Grande state.

There is still no cold weather threat for the southwest winter wheat belt the next 7days but the midwest soft red winter wheat belt is facing a cold weather threat next week, which could lend some support to the Chicago wheat market.---Vic Lespinasse

Grains Point Higher Despite Mixed Outside Signals

A higher start is indicated this am, roughly 5 wheat, 5-10 corn and 20-25 beans following similar overnight gains. Crude oil is higher with the spot month, Feb, hovering around the $50 level but the $ is sharply higher so the outside markets are sending mixed signals to the grains this am.

Saudi Arabia is in the market Friday for 495,000 tonnes of optional origin milling quality wheat. US prices are not competitive so we will likely not get any of this business. Canadian wheat prices are about $60 a tonne below US prices while Australian wheat prices are about $48 a tonne lower with these two countries favored to capture the business.

Talk in China is that the government will release between 100,000 and 600,000 tonnes of bean oil into their domestic market to dampen rising prices ahead of the start of the Chinese lunar new year, beginning Jan 26. Trade sources in China say this oil will be replaced with additional bean oil imports, which is friendly for this market.

Informa will put out their final 2008 production guesses as well as 2009 wheat acreage estimates at 10:30am US Central time. The big USDA report will follow next Monday am. Trade averages for this report should start coming out by tomorrow afternoon.

Argentina was hot and dry the last 24 hours and only very light, isolated rain is forecast today and tomorrow with temps staying very hot. Mostly dry weather is forecast to persist through the upcoming weekend with scattered rain finally arriving Sunday. More dry weather is then forecast to return Mon-Thur next week. Brazil was dry the last 24 hours and more of the same is forecast today-Thursday with scattered rain likely Fri-Sun, favoring the southern part of the country (Rio Grande state). Next week, more beneficial rain is forecast in the south but mostly dry weather is likely elsewhere.

There is still no cold weather threat to the winter wheat crop in the midwest or southwest for the next 7 days, according to Meteorlogix Weather.---Vic Lespinasse

Little News to Move the Grains with the Market in Winter Doldrums

A lower start is expected in most pits this am, roughly 10 in wheat and 5-7 in corn. Beans are called steady/mixed, as are the products. Crude oil is a little lower this am and the $ index is sharply higher, a bearish combination for the grains.

Jordan is in the market Jan 21 for 100,000 tonnes of optional origin wheat. Deliveries were 228 in beans with the delivery date Dec 21 and 1660 in oil with the date Dec 31. There were no commercial stoppers in either pit. There isn't much news otherwise this am with the market in the winter doldrums.

Argentina was mostly dry over the weekend with temps above normal. It will remain mostly dry today and tomorrow with very high temps, which will further stress corn and beans. Welcome rain is possible the second half of the week in Cordoba and Santa Fe, two of the main grain growing provinces in the country. Dry weather is forecast to return by Friday and continue through the weekend with high temps, continuing to stress the crops. The outlook for the first half of next week isn't any better with hot and dry conditions forecast to presist. Brazil benefited from up to 1.5" of scattered rain over the weekend but it will be mostly dry today through Thursday before scattered rain returns late in the week.

There is no cold weather threat for the winter wheat belts of the midwest or southwest this week.

Crude Oil Will Determine Tentative Grains Open

A lower start is tentatively expected this am following lower crude oil prices and the stronger $ index. Crude oil, however, has recovered most of its early losses this morning and if it keeps strengthening this would take a lot of selling out of the grains on the opening, possibly allowing them to start better. The $ index has slipped from its highs, which will further reduce early pressure on the grains.

The USDA five-year revisions Wednesday afternoon didn't amount to much with no changes in the carryover for this year although production was cut 36 million bushels for corn and 22 million bushels for wheat while bean production was raised about 14 million bushels net for the last 5 years. Bottom line: zero impact on the market from this report.

Weekly export sales were better than expected in wheat at 418,000 tonnes, and beans at 511,000 tonnes. Corn sales were slow at 270,000 tonnes, as was meal at 43,000 tonnes, and oil, minus 6700 tonnes. Deliveries were 415 beans to Dec 12 and 1906 oil to Dec 30.

The USDA announced this am that China bought 115,000 tonnes of US beans.

The five largest index funds lost an average of 40.5% in the last quarter of 2008. For the year as a whole, they lost an average of just over 42%.

Newedge, formerly Fimat, was a late buyer Wednesday of 3000 Mar corn and 1000 Mar beans. JP Morgan was a late buyer that day of 500 Mar beans while UBS was a late buyer of 1500 Mar corn. All this late support helped rally prices into the close.

Argentina saw up to 1.5" of much needed rain in Cordoba province the last 48 hours but mostly dry weather elsewhere during this time. It will be mostly dry today through Tuesday with generally above normal temps. The best chance of rain is in the second half of next week, along with cooler temps. In the meantime, further stress is likely for corn and beans in most provinces. Brazil had up to 1.5" of beneficial rain in parts of Parana state the last 48 hours with dry weather elsewhere. Up to .5-2.5" more widespread rain is forecast the next couple of days, favoring the state of Parana, with dry weather forecast the first half of next week. Overall, Brazilian weather remains much more favorable than Argentine conditions.

There is still no cold weather damage threat for the winter wheat belts of the midwest and southwest the next 7 days. ---Vic Lespinasse