Global Economic Concerns Push Bear Grains Market

A lower start is expected this morning, 4-5 in wheat and corn, 15 in beans. Crude oil and the equity markets are under strong pressure this morning while the $ index is higher, a bearish combination for all the grains. The main influence on the market today is likely to be the bearish outside markets and worldwide economic worries.

Argentina's two largest newspapers, La Nacion and Clarin, are reporting the government is considering taking over and nationalizing grain exports. This might only be a ploy by the government to pressure farmers ahead of scheduled talks next Tuesday to discuss policy differences. Some countries, such as Canada, have a nationalized grain export system but Argentine farmers would likely strongly resist such a move and this could disrupt Argentine grain exports. If this happened, it would be bullish for US grain export prospects and prices. The government denies it is considering such a move.

Deliveries were 3900 wheat to Feb 26, 3700 corn to Feb 10, 2400 oil to Feb 19, 2 meal to Nov 7 and no beans. There were no big commercials stoppers in any of the grains. Algeria bought 300,000 tonnes of optional origin wheat, thought to be French.

The USDA released its supply/demand numbers this morning: a wheat crop of 2.120 billion bushels vs. 2.500 billion last year; 12.365 billion bushels of corn vs. 12.101 billion last year; 3.240 billion beans vs. 2.959 billion last year. Bean oil used to make bio diesel fuel 2.9 billion lbs for the 2009-10 year is unchanged from the 2008-09 crop year. Corn, used to make ethanol, is 4.1 billion bushels in 2009-10 vs. 3.6 billion in 2008-09. Oil ending stocks of 2.248 billion lbs vs 2.243 billion last year; wheat ending stocks 664 million bushels vs. 655 million last year; corn ending stocks 1.720 billion bushels vs. 1.790 billion last year and bean ending stocks of 380 million bushels vs. 210 million last year. Some of these numbers, such as the bean ending stocks, were out already yesterday so they are already in the market. Overall, the impact of these numbers this morning is likely to be neutral at best, more likely negative for prices.

More beneficial precipitation is forecast in China's winter wheat belt the next 5-7 days. Brazil benefited from up to 1.5" of rain in the south the last 24 hours and more of the same is forecast the next several days. The north will see unwelcomed scattered rain over the weekend, slowing early bean harvesting, before dry weather moves into the region early next week. In Argentina, dry weather is forecast today until Sunday night, when .3-1.5" of rain is forecast over much of the main growing areas until about Tuesday morning. This will still be very welcome, especially for beans. Dry weather is forecast the second half of next week.

The US southwest winter wheat belt is forecast to remain mostly dry the next 10 days or so, increasing stress on the soon to be coming out of dormancy crop, with its escalating moisture needs. --Vic Lespinasse

Export Sales Figures, Jan Crush, and USDA Announcements Combine with Friendly Outside Markets on Grains This AM

A mixed to mostly lower start is likely this morning, down 3 in wheat, steady/1 better corn and 5-8 lower beans. Crude oil is higher, as are equity markets, while the $ is lower, a friendly combination for the grains.

Weekly export sales were good for wheat with 465,000 tonnes for this crop year and 112,000 tonnes for next crop year. Meal was at 146,000 tonnes. Corn sales were slow at just 449,000 tonnes, as were beans at only 339,000 tonnes, and oil at 8500 tonnes. 144,000 tonnes of US bean sales were cancelled to an unknown destination, widely assumed to be China. The USDA also announced the sale of 116,000 tonnes of US corn to South Korea this am.

The USDA is predicting US wheat acreage this year of 58 million acres vs 63.1 million last year. They estimate corn acres at 86 million, unchanged from last year, and bean acreage at 77 million vs 75.7 million last year. Supposedly, Joe Glauber, the Chief USDA Economist, predicted a 380 million bushel bean carryover for the 2009-10 crop year vs only 210 for this crop year, 2008-09. He also supposedly said the corn carryover would be slightly bigger. A 380 bean carryover would be bearish for new crop beans.

The Census Bureau Jan crush was in line at 145.2 million bushels. Oil stocks were a bit higher than expected at 2.929 billion lbs while meal stocks were also bigger than predicted at 447,000 short tons.

The China National Grain and Oilseed Information Center (CNGOIC), a government-connected think tank, said 2-3 cargoes of US bean purchases were cancelled, which fits nicely with the 144,000 tonnes announced this am. Interestingly, for the second week in a row, China bought US wheat, taking 50,000 tonnes of soft red winter wheat after buying 30,000 tonnes last week. China is thought to have a huge wheat stockpile of roughly 60 million tonnes and they are saying drought conditions in their wheat crop have been all but eliminated by recent rain/snow with more in the forecast the next week or so. US wheat prices are high relative to Black Sea origin, such as Russia, but the quality of US wheat is much better and, for cash-rich countries like China, higher US prices are less of a concern.

The CNGOIC said that Chinese companies bought 150,000 tonnes of South American bean oil this week and they are in for 50,000 tonnes more. Bean oil currently commands less than a $50 a tonne premium to palm oil vs the usual $100 a tonne, making it attractive to Chinese buyers. Much of the oil was thought to be Argentine origin.

The annual USDA Outlook Conference starts today in Washington but they might not release acreage and supply/demand numbers until tomorrow morning. The market is eagerly awaiting these numbers, even though they are not empirically based, just the current best judgment of the USDA. There is a widespread belief the USDA will produce higher bean and lower corn acres than they released earlier this month, which was mostly for the benefit of the Office of Management and Budget.

Brazil will see up to 1" more scattered rain the next several days in the south where it is still welcome. Unwanted rain is likely in the north, where it will slow bean harvesting the next 2 days before dry weather moves into the region. Argentina will be hot and dry until Sunday when widespread rain is predicted, continuing until Tuesday. This will be followed by another hot and dry spell for several days, making the upcoming rain event more important. More beneficial rain is forecast in the Chinese winter wheat belt the next several days.

The US southwest winter wheat belt will remain stressfully dry the next 10 days and the longer this dry spell extends into March, the more stress it will put on the crop.---Vic Lespinasse

Higher Grains Start Likely Despite Outside Mixed Signals

A slightly higher start is likely this am, roughly 1-2 in wheat and corn, 3-4 in beans. Crude oil is higher but so is the $ while equity markets are a bit lower, sending mixed signals to the grain market this am.

Talks between the 4 main Argentine farmers unions and the government made some progress yesterday with more talks scheduled next week according to one report. Argentine farmers have called off their strike, at least for now. This is bearish for US bean prices. While the government supposedly made some concessions to the farmers, the main sticking point, the 35% bean export tax, remains with no progress reported. Still, farmers now seem in a concilatory mood so there is a better chance than previously expected that a prolonged strike can be avoided.

More reports are circulating that China cancelled US bean purchases, perhaps 3 cargoes or 180,000 tonnes. Algeria is in the market for 300,000 tonnes of optional origin wheat, according to European traders.

The USDA Outlook conference starts tomorrow and ends Friday in Washington. The results of this conference could move the market those days.

More rain fell in China's winter wheat belt overnight and additional amounts are predicted the next 1-3 days, which will further reduce drought stress in this region, including in Henan province which grows about 30% of China's wheat crop. Scattered rain fell overnight in Brazil, where it isn't welcome in the north as it delays early bean harvesting. More rain is likely today through Friday in northern and central areas, such as Mato Grasso and Parana states. Rio Grande state in the far south will be dry until welcome rain returns Sat-Mon. Argentina was dry yesterday and more dry weather is forecast until Sunday night - Monday, when up to 1" of welcome, widespread rain is expected. Dry weather is forecast Tue-Fri next week again.

The US southwest winter wheat belt is forecast to remain mostly dry the next 10 days, taking the dry winter pattern into early March. If this trend continues much longer, it will severely stress wheat as it comes out of dormancy and moisture needs increase sharply, which would be bullish for wheat prices.

Watch crude oil, the $ and the equity markets today for possible direction in the grains. Also watch the updated Argentine weather mid-morning for input in the grains. ---Vic Lespinasse

Overnight Losses Plus Mixed Outside Signals Ahead of Grains Open

A lower start is likely this am, roughly 3-4 in wheat and corn, 6-8 in beans, following overnight losses. Crude oil, equities and the $ are all slightly higher this am, sending mixed signals to the grain market.

Argentine farmers start talks with the government today over their many policy differences. Depending on how the talks go, the strike could end or be extended and if it is, the longer it lasts the more bullish it would be for US grain prices, especially beans. This is a potentially bullish influence for our market so traders will be watching developments closely. Traders will also pay close attention to the USDA outlook conference in Washington Thur-Fri, which could move the market depending on what the USDA says.

There is talk China bought around 90,000 tonnes of bean oil and is in for more. Usually, bean oil commands a steep premium to palm oil but lately this premium has fallen significantly, making bean oil much more competitive vs palm oil.

US wheat has a $24 a tonne premium to Russian wheat, which is why Egypt only bought Russian wheat yesterday in their 240,000 tonne tender.

President Obama gives his State of the Union speech tonight, which could move the financial markets overnight, influencing the grains tomorrow.

China's winter wheat belt continues to benefit from precipitation with more seen over the last 24 hours and more forecast today. Argentina will be mostly dry today through Sunday with good rains still forecast starting early next week, according to one forecaster. Another forecaster sees good rains starting in Argentina's corn and bean areas a day or two earlier after dry weather all this week. Brazil saw up to 1" of rain in both northern and southern bean areas the last 24 hours. It is welcome in the south but not in the north, where rain slows harvesting. More rain is forecast today-Thursday in both the north and south.

It will be mostly dry the next 10 days or so in the US southwest winter wheat belt. If this dry pattern continues beyond that, it will become increasingly supportive for wheat prices as moisture needs in the southwest will increase sharply as the crop comes out of dormancy. ---Vic Lespinasse

Higher Grains Start Expected Following Overnight Gains

A higher start is expected in all pits, around 5-10 wheat, 10 corn and 17-20 beans, following similar overnight gains. Crude oil is higher while the $ index is slightly higher this am.

Egypt bought 240,000 tonnes of Russian wheat, nothing from the US.

Argentine farmers remain on strike at least until late tomorrow afternoon, when talks with the government are scheduled to start. If the strike continues beyond tomorrow and the talks don't go well, which is a good possibility, this would be friendly for US bean export prospects and prices.

The USDA outlook forum will take place in Washington Thur-Fri and news from this forum could move the market.

More beneficial rain is forecast in China's winter wheat belt over the next week or so, which will be welcome. Brazil saw beneficial rain over the weekend in the south with more welcome rain forecast there the next several days. Harvest delaying rains will fall in northern Brazil the next few days. Argentina saw up to 2.5" of much needed rain over the weekend. This was expected. Dry weather and above normal temps are forecast the next 5-6 days but wet to very wet weather is forecast to return by Sunday for several days, which will still be welcome for beans.

The US winter wheat belt will be mostly dry the next week or longer, providing some support for our wheat prices as the dry weather will stress the crop as it starts to come out of dormancy next month. ---Vic Lespinasse

External Market Pressure Looks to Lower Grain Prices

A lower start is likely this morning, roughly 7-10 wheat, 3-5 corn and 12-15 beans. The outside markets could weigh heavily on grain prices again this morning with energy and equity markets under strong pressure while the $ index is higher, a bearish combination for all the grains.

Weekly export sales were good for wheat, 433,000 tonnes. Corn sales were at the high end of trade estimates, 1.332 million tonnes while beans were much higher than expected at 1.094 million tonnes. Meal sales were in line, 143,000 tonnes while oil sales were very good, 46,000 tonnes.

Included in the bean sales were 874,000 tonnes sold to China, who continues to buy very large amounts of US beans. Talk continues about possible Chinese cancellation of 1-2 cargoes of US beans but there has been no confirmation so far of this talk.

Argentine farmers are going on a strike today that is expected to last until late Tuesday afternoon, when talks with the government begin. This news reached the market late in the session yesterday but had no bullish impact on prices - beans actually fell at the close due to late fund selling and ended lower. Unless the strike lasts more than just a few days, its impact should be relatively minor, if any.

Argentina saw rain start overnight and more is forecast today into tomorrow am. Up to 2" of widespread rain is predicted, which will be very welcome. Temps are expected to cool over the weekend, which will also be welcome. Dry weather is forecast starting Sunday and continuing all next week, making today's rain event vital to prevent any more crop losses, especially for beans.

Brazil saw light rain in the south overnight and more is forecast today through Tuesday. Light, scattered rain is forecast in the north the next few days also but it is not welcome there as it could delay early bean harvesting.

Chinese authorities are now saying the drought stricken winter wheat and rapeseed areas have been reduced very sharply by recent precipitation. More beneficial precipitation is forecast over the next week or so.

In the US very little precipitation is forecast in the winter wheat belt the next 7-10 days. The crop will come out of dormancy starting next month, increasing moisture needs sharply so the lack of moisture could soon become a bullish influence for wheat prices.

Traders will watch the updated Argentine weather forecast mid morning and any news regarding the strike for guidance during the session. They will probably pay even more attention to the outside markets for direction, especially if the outside markets, mainly crude oil, the $ and the equity markets, make a big move in either direction.--Vic Lespinasse

Sellers Hold Awaiting Rally From Oversold Market

A higher start is expected in all pits this morning, around 2-4 wheat and corn with beans about 7-10 better. Crude oil and the equity markets are higher while the $ is lower, a bullish combination for the grains. Technically, many traders think the market is oversold and overdue for an upside correction, making them reluctant to keep pressing the market at current levels. This could keep a lot of would be sellers on the sidelines and keep a lot of pressure off the grains, allowing them to rally. Some wheat export business was done with Taiwan taking 91,000 tonnes of US wheat while Japan bought 75,000 tonnes of the same.

Reports from Argentina indicate the government has not responded to the 4 main farmers unions request for talks to discuss their numerous policy differences. The unions are once again threatening to go on strike, as they did for 4 months last year. If there is a widespread Argentine farmers strike lasting more than a few days, this could shift grain export business, especially beans, from Argentina to the US, which would be bullish for US markets, of course.

A senior executive with COFCO, one of the two authorized Chinese corn exporters, (the other being the big corn growing state of Jilin) said China would not be a big corn exporter or importer for the next few years. Many analysts have thought China will be a big corn importer the last few years but this hasn't happened yet. China had another record harvest of 165.5 million tonnes last fall and now they are in the process of buying 40 million tonnes of that harvest to build state reserves so imports seem very unlikely anytime soon.

Weekly export sales will be out tomorrow morning , delayed by Monday's holiday.

Recent moisture has cut China's drought stricken winter wheat areas to less than average for this time of year, according to the Office of State Flood Control and Drought Relief Headquarters. More rain is forecast for this region, where it is welcome.

Argentina was mostly dry the last 24 hours and more dry weather, along with hot temps, is forecast today before much needed rain moves into the corn and bean areas Fri-Sat. Anywhere from 1/2" to 2" is forecast before dry weather returns Sunday and continues all next week.

Brazil saw up to 1" of welcome rain in the south the last 24 hours with more today through Tuesday, easing any dry weather concerns. Northern Brazil will see some more bean harvest delaying rains the next few days.

The southwest US winter wheat belt will remain mostly dry the next week or longer, increasing the need for significant moisture once the crop starts coming out of dormancy next month.

Traders will once again be closely watching the mid morning updated Argentine weather forecast for guidance the rest of the session.-- Vic Lespinasse

Equities & Crude Holding to Support Grains

A slightly lower start is indicated this morning, roughly 3-5 in wheat and beans, 1-2 in corn. Crude oil and the equity markets are a shade better this morning while the $ index is a shade lower, a neutral to slightly support influence for the grains. There is talk that China bought 2 cargoes, roughly 110,000 tonnes, of US beans but we are awaiting confirmation of this.

More welcome rain is likely in the Chinese winter wheat belt the next week or so. Mostly dry weather is likely in the US southwest winter wheat belt the next 7-10 days. Widespread rain will be needed in both the Chinese and US winter wheat belts staring next month when the wheat comes out of dormancy and moisture needs increase sharply.

Brazil had scattered rain in the north the last 24 hours, slowing early bean harvesting. It was dry in the south except for some scattered rain the last 24 hours in Parana. Scattered rain is forecast to continue in the north the rest of this week through the weekend. Welcome scattered rain is forecast in the south, mainly Rio Grande, tomorrow through Sunday.

Argentina saw mostly dry weather the last 24 hours. Rain is forecast starting tomorrow night and continuing until Saturday in most Argentine corn and bean areas with up to 1.5" forecast, according to Meteorlogix Weather. Temps will remain on the high side until the weekend, when cooler weather is likely. Mostly dry weather is forecast again Sun-Thur next week.

Traders will continue watching the outside markets for guidance today if they make a big move in either direction, mindful of yesterday when the outside markets had a major influence on the grains - to the downside. Also, pay close attention to the updated Argentine forecast out around 11 am central time.-- Vic Lespinasse

Crude and Equities Sharply Lower for Bearish Influences on the Grains

A lower start is expected in all pits, roughly 5-7 wheat, 3-4 corn and 15-20 beans following similar overnight losses. Crude oil and the equity markets are sharply lower this morning while the $ is much higher, a bearish combination for all the grains.

ABARE the Australian version of the USDA, upped its 2008-09 wheat production estimate from 20 million tonnes previously to 21.4 million.

Oil stocks were a big bearish surprise at 2.394 billion lbs vs. trade ideas of only 2.222 billion. The NOPA, National Oilseed Processors Association, Jan crush came in about 1 million bushels higher than expected at 139.1 million bushels.

China announced they will buy another 10 million tonnes of domestic corn to build state reserves. Purchases will total 40 million tonnes, almost 1/4 of the total harvest!

Rain over the last 3 days in Argentina was disappointing with only isolated coverage of light amounts. Dry weather is forecast today through Thursday along with hot temps. Much needed, beneficial rain is forecast Fri-Sat, up to 1", along with cooler temps, according to Meteorlogix Weather. Other forecasters, such as Frese-Notis, expect .5"-2" of rain during this time with widespread coverage. Dry weather is forecast again Sun-Thur next week, according to Meteorlogix.

Northern Brazil had harvest delaying weekend rains of up to 2". Somar, the widely followed Brazilian forecaster, predicts mostly dry weather in the north this week as rain shifts to the south, where it is welcome.

Welcomed rain fell in parts of China's winter wheat belt over the weekend with more expected this next week.---Vic Lespinasse

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The trading floor of the Chicago Board of Trade is closed for the President's Day US holiday. Vic Lespinasse's Daily Grain Commentary will return Tuesday, February 17.

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Grains to Open with Mixed Outside Signals

A mixed but slightly lower start is expected this morning. Crude oil is a little higher, the $ index and equities markets a little lower, sending mixed signals to our grain market this morning.

Argentine farmers decided not to strike or protest for now, instead seeking to hold talks with the government to resolve their differences. The lack of an imminent strike threat is a negative background feature for our market this morning, especially beans. If Argentine farmers do strike, holding beans off the market, especially if it is for more than just a few days, this could shift export demand from Argentina to the US. The lack of any strike threat for now is negative for our bean market.

Taiwan will be in the market Thursday for 89,000 tonnes of US wheat. South Korea apparently bought more US corn late yesterday, 220,000 tonnes. Malaysian palm oil gained 67 ringgit today to hit a 5 week high, 1995 ringgit.

There was some much needed rain in parts of the Chinese winter wheat belt yesterday, up to .7". Some additional rain is also possible early next week, which would be very welcome.

Argentine corn and bean areas were mostly dry the last 24 hours and more of the same is expected today through Sunday with above normal temps. Meteorlogix Weather has increased its forecast for rain early next week compared with its previous forecast, now calling for up to .6"of scattered and much needed rain. They then see dry weather Tue-Wed but cooler temps, followed by scattered rain Thur-Sun next week and continued cool temps. This forecast is bearish and could weigh on the market today, especially beans.

Brazil saw up to 1" of rain in the north yesterday with dry weather in the south. More rain is forecast in the north the next few days, which could delay bean harvesting, while the south continues mostly dry. Rain is forecast in the south early next week, as well as in the north.

There will probably be some evening up trading later today ahead of the long 3 day holiday weekend. Watch the updated Argentine weather forecast mid am along with any major moves in crude oil, equities or the $ today for guidance during the session.---Vic Lespinasse

Higher Dollar, Lower Crude Oil & Equities

A slightly higher start is the tentative early call following mixed prices overnight. Crude oil is a little lower and the $ a little higher while equities are a bit lower, a negative combination for the grains. Weekly export sales were in line for wheat, 412,000 tonnes, good for meal, 197,000 tonnes, and very good for corn, 1.544 million tonnes, beans, 1.069 million tonnes and oil, 46,000 tonnes. .

China once again accounted for most of the bean sales, taking 724,000 tonnes. South Korea reportedly bought 165,000 tonnes of optional origin corn and 55,000 tonnes of optional origin meal while Japan bought 86,000 tonnes of US wheat at their weekly tender.

The 4 main Argentine farmers unions are meeting today and expected to announce protest policies against the government. All they are expected to do for now is stage protests and possibly hold grain, especially beans, off the market for 2-3 days late this month. If this is all they do, the impact on our market will be nil. It would take a prolonged strike of farmers holding beans off the market, as they did last year, to have a bullish impact on our market. The Argentine government authorized the export of 520,000 tonnes of wheat and 6 million tonnes of corn after determining stocks were adequate to ensure domestic supplies.

Rumors remain rife on the trading floor that the CME Group, which owns the Board of Trade, is going to extent electronic trading hours for grains, either past the current 6 am close or past the current 1:15 pm close. If the afternoon close is extended, this would cause even more business to move from the pits to the electronic market, which already accounts for the great majority of trading volume in futures. Most of the options volume is still done the old fashioned way, in the pits, and this isn't likely to change anytime soon even though options are also traded electronically.

Up to 1.25" of welcome rain fell in southern Brazil the last 24 hours. It will be mostly dry in the south with scattered rain in the north today through Saturday. Argentina was mostly dry the last 24 hours. More of the same is forecast today through Tuesday although some light, scattered rain is possible Sun-Mon. Temps are expected to be hot Fri-Tue. Unlike yesterday's forecast, today's long range outlook sees widespread rain and cooler temps toward the end of next week, which would be very welcome, especially for beans.

Keep an eye on the equity and energy markets as well as the updated Argentine weather outlook mid morning for direction later in the session again today.---Vic Lespinasse

Equity Markets May Continue Pressure on Grains

A lower start is likely across the floor this am, roughly 5-10 wheat, 3-4 corn and 10-12 beans. Crude oil is a little higher while the $ is a little lower but not enough to make much difference to the grains. Traders will pay some attention to the equity markets today as their big sell off yesterday pressured grain prices. There isn't much news yet this am outside of the weather. Watch it along with the outside markets for direction in the grains today. Traders will pay close attention again today to the mid-morning Argentine weather forecast.

Argentine growing areas had up to 1.5" of much needed rain yesterday with up to 1" in Cordoba province, Argentina's largest grain growing province. This was a bit more than expected. However, the two forecasts I have seen so far this am call for mostly dry weather the next 9 days with high temps the next 7-8 days. Some forecasters see rain early next week but amounts are expected to be too light to benefit the drought- and heat-stressed corn and bean crops very much. Brazil is expecting up to 1.5" of rain in the south the next few days which will be welcome. Rain is forecast in the north this weekend, where it could slow early harvesting efforts.

Mostly dry conditions are forecast in the southwest winter wheat belt the next week or longer. This isn't a major problem now but it could become one if this dry spell extends into the spring, when wheat comes out of dormancy and moisture needs increase sharply.

USDA Report Viewed as Generally Bullish for Grains

Crude oil is strong, up triple digits this am, which could lend some support to the grains, mainly corn and bean oil due to their biofuel link. The $ index is a little higher but not enough to influence the grains very much this am. Dalian, China grain futures were mixed this am. Malaysian palm oil jumped 89 ringgit today to 1969 ringgit, a one month high. Our grain prices were mixed overnight.

The USDA report is being viewed as bullish with the early call roughly 5 higher in wheat and corn, 10-15 up in beans. Most of the numbers seemed generally in line to me but other traders are reading them as bullish. I think the numbers certainly were not bearish and since I am a bull, I welcome the bullish spin traders are putting on the report this am.

The bean carryover was 210 million bushels, corn was 1.790 billion bushels and wheat was 655 million bushels. The oil carryover was 2.243 billion lbs, up 100 million lbs from last month, while the meal carryover was unchanged from Jan at 300,000 tonnes. The USDA is estimating 3.6 billion bushels of corn will be used to make ethanol this year during the 2008-09 crop year, unchanged from last month's guess. They are estimating 2.9 billion lbs of bean oil will be used to make biodiesel fuel, down 200 million lbs from last month. (It takes 7.5 gallons of bean oil to make 1 gallon of biodiesel fuel.)

World carryover stocks were raised slightly in wheat, to 149.96 million tonnes vs 148.4 million last month. World corn carryover was guessed at 136.7 vs 136.0 last month while beans were estimated at 49.87 million tonnes vs 53.94 million last month due to lower South American production. World meal carryover stocks were estimated at 5.25 million tonnes vs 5.65 million last month and world oil carryover was put at 2.41 million tonnes against 2.55 million last month.

The USDA cut its Argentine corn production estimate to 13.5 million tonnes vs 16.5 million tonnes last month. Argentine wheat production was cut to 8.4 million tonnes vs 9.5 million previously. Argentine beans were guessed at 43.8 million tonnes vs 49.5 million a month ago. Recall the USDA attache in Argentina estimated the crop even lower at 42.5 million tonnes while the latest Buenos Aires Grain Exchange estimate is 40 million. The USDA thinks the Brazilian bean crop will total 57 million tonnes vs their previous guess of 59 million. This is roughly in line with trade ideas for Brazilian beans.

Brazilian bean harvesting has reached 3%, the same pace as last year at this time.

A senior Chinese government official said their wheat crop could be in serious trouble if sufficient rains don't fall in the next two weeks. This is contrary to previous government reports that losses of only 2-5% roughly are feared from the current dry weather pattern in the winter wheat belt. Bottom line: The jury is still out with weather during Mar and April much more important to the final outcome than current weather. The months-long dry spell does make it essential, however, that ample moisture is seen during the spring months or losses could be much larger than currently envisioned.

Argentina will benefit from scattered rain today, up to .6" or 1" depending on which forecast you follow. Dry weather is then expected from Wednesday to Sunday with above normal temps later in the week. The forecast for next week doesn't offer any relief with hot and dry conditions predicted Mon-Thur. If this outlook is correct, it will severely stress the bean crop, which is in its most moisture-sensitive development stage, setting pods. Brazil is expecting up to 1.5" of beneficial rain in the south today and tomorrow with dry weather the rest of the week. Northern areas had up to 1" of rain the last 24 hours with more expected the rest of the week, possibly slowing harvesting.

Light, scattered precipitation in the US southwest winter wheat belt will be seen the rest of this week, where it is very welcome. Much more moisture will be needed in Mar and April in the dry southwestern part of the belt to ensure a good crop this season following a long period or below normal moisture.

Review the complete USDA Report here

Higher Grains Start Anticipated Ahead of Tomorrow's USDA Report

A higher start is likely this am, roughly 7-10 in wheat and beans, 1-2 in corn. There will probably be some evening up later today ahead of the USDA supply/demand and world crop production reports tomorrow am. Crude oil is a bit higher while the $ index is lower, a friendly combination for the grains this am.

Iraq bought a total of 350,000 tonnes of wheat from Canada, Germany, Australia and Russia, nothing from the US. Iraq hasn't bought any US wheat now since last May. The USDA announced this am that China bought 120,000 tonnes of US beans while South Korea took 100,000 tonnes of US corn.

The Baltic Exchange dry freight index had its strongest week last week since at least 1985. The index surged almost 600 points to over 1600. Bullish traders are hopeful this is a sign of nascent demand for commodities, including grains. The index hit a record last May of almost 11,800 points before falling to under 800 points in early December.

The Buenos Aires Grain Exchange increased its estimate of the size of the Argentine bean crop to 40 million tonnes vs their Jan estimate of around 34.5-38 million.

Up to .6" of rain fell in the dry winter wheat areas of China over the weekend with more light amounts of much needed rain forecast this week. Argentina had a mostly dry weekend but rain is forecast starting tonight and continuing through tomorrow, up to .6" according to some forecasters with others seeing up to 1" amounts. Mostly dry weather is forecast the second half of the week through early next week but some forecasters still see beneficial rain in the 6-10 outlook. Brazil benefited from up to 1.5" rains in Parana state over the weekend but Rio Grande state was dry. A similar pattern will be seen today and tomorrow but rain is forecast in Rio Grande mid week. Mato Grasso had up to 1.5" of rain over the weekend with more forecast the next few days.

The dry parts of the US southwest winter wheat belt had up to 3/4" of rain last night with more beneficial rain forecast tomorrow. Good rains will be critical in both Chinese and US winter wheat areas this spring following dry winters.

Higher Grains May Continue with Weather Worries in Argentina

A higher start is expected in all pits this am, roughly 5 in wheat and corn, 15-20 in beans, based on dry weather worries in Argentina. Crude oil is lower, a negative background influence for the grains. The $ index is down a shade, not enough to provide much support for the grains.

South Korea bought 165,000 tonnes of optional origin corn late yesterday, taking a total of about 440,000 tonnes this week.

Russia's State Statistical Service reported the 2008 total grain harvest was 108 million tonnes, the largest since 1990. Reports continue to circulate about the possibity of an Argentine farmers strike the second half of this month, which would be bullish for US bean export prospects. No official decision has been reached yet by the four main farmers unions that successfully staged a months long farmers strike last year.

China's Meteorological Administration expects rain over the weekend in the drought hit winter wheat areas but amounts will be very light. Henan province, China's largest wheat growing province, will only see 1/4" rain or less, for example, not nearly enough to offset the driest season since 1951. However, winter wheat is dormant now with moisture needs low - you can't kill a wheat crop in the middle of winter no matter how dry it is. Weather in Mar and April will be more critical than usual, however, especially since it has been so dry in much of the belt since last fall. Supposedly, China has a huge wheat stockpile, roughly 60 million tonnes, to fall back on if the crop is hurt by dry weather this spring. Chinese government officials currently estimate losses from the drought of only 2-5% of the crop but a much larger loss is possible IF the drought continues this spring. This possibility helped drive wheat prices higher yesterday and could provide support again today.

Argentina will be dry the next 10 days with temps very hot starting mid next week, according to Meteorologix Weather. Others, such as Frese - Notis, still see much needed rain early next week but the market, judging by overnight gains, is going with the dry view, adding a weather premium back into prices. Brazil will see welcome rain in the south the next few days, including Rio Grande and Parana states, with up to 1.5" likely in Rio Grande. More rain is forecast the first half of next week. Mato Grasso, the largest bean growing state in Brazil, will see more scattered rain today through Monday. Watch the updated Argentina weather forecast mid-morning for direction in the grains the second half of the session.

Much needed moisture is forecast in the dry parts of the southwest US winter wheat belt starting Sunday, with up to .5" possible. More moisture is possible the first half of the week.

Argentine Weather Continues as Main Grains Market Mover

A higher start is likely this am, roughly 10 in wheat, 2 corn and 5-10 beans. Crude oil is steady/better this am while the $ is a shade better also, not enough to impact the grains. Traders are likely to continue focusing on Argentine weather as the main market mover in the grains, especially beans, again today.

Weekly export sales were in line for wheat at 327,000 tonnes, meal at 184,000 tonnes and oil at 10,000 tonnes. Corn sales were better than expected at 1.164 million tonnes, but bean sales were slower than indicated at 337,000 tonnes.

Conab, a division of the Brazilian Agriculture Dep't, cut their bean crop guess to 57.2 million tonnes vs 57.8 million last month. Their corn guess was cut to 50.3 million vs 52.3 million last month. The USDA attache in Argentina estimated Argentine bean production at only 42.5 million tonnes vs the official USDA guess of 49.5 million. The USDA will put out their new Argentine bean guess Tuesday am in their monthly world production report, along with US and world supply/demand numbers. Many traders think Argentine bean production is in the low 40's currently so the attache's estimate is not surprising.

Stats Canada estimated grain stocks as of Dec 31 at a record high for canola, 9.1 million tonnes vs 7.4 million a year ago, and oats, 3.3 million tonnes vs 3.2 million a year ago. All wheat stocks were put at 21.9 million tonnes vs just 16.1 million a year ago.

Japan bought 86,000 tonnes of US wheat at their weekly tender.

The amount of bean oil used to make ethanol in the US fell to 194.4 million lbs in Dec vs 234.5 million in Nov according to the US Census Bureau monthly oilseed stocks report this am.

Chinese officials have declared an emergency in parts of the winter wheat belt due to severe drought conditions. However, Chinese wheat futures prices have not rallied due to huge wheat stockpiles and the government is estimating only a 2-5% fall in wheat production due to the drought. Argentina had overnight rains of up to 1" with up to .75" forecast today, followed by dry weather Fri-Tue. However, some rain is likely during this dry period in Cordoba, one of the main corn and bean growing provinces in Argentina. This relatively dry forecast is from Meteorlogix Weather. Other forecasters, such as Frese-Notis, see up to 2" of beneficial rain today with more early next week and beyond. The wetter mid-morning forecast yesterday weighed heavily on the market but this am the market seems to want to put some weather premium back in place. Brazil will see scattered rain in the south this weekend into early next week, which will be welcome. Amounts should be good in Parana state, one of the three biggest bean and corn growing states in the country. Mato Grasso will see light, scattered rain today and tomorrow. Mato Grasso is the largest bean growing state in the country.

Some much needed moisture is forecast in the US southwest winter wheat belt next week.---Vic Lespinasse

Higher Grains Start Likely Despite Outside Mixed Signals

A higher start is likely in all pits this am, roughly 3-5 wheat, 1 corn and 7-10 beans. Crude oil is higher but so is the $, sending mixed signals to the grains.

Egypt is in the market for wheat with results expected shortly before our opening. US wheat is competitively priced so traders expect we will get some of the business. If not, this would be a bearish influence for wheat. US corn is also competitively priced in the world market, illustrated by South Korea buying 116,000 tonnes this am, according to the USDA. Separately, South Korea also bought 110,000 tonnes of US corn. Finally, they bought 165,000 tonnes of optional origin wheat.

Informa will estimate US crop production at 10:30am US Central time. Usually, their estimates do not have a major influence on the market. Traders are expected to focus again today on Argentine weather with the mid morning update a potential market mover.

The forecast for Argentina seems drier this am with little moisture expected until tomorrow, when .25-1.0" are forecast, covering 65% of the belt. Dry weather is then forecast Fri-Mon, according to Meteorlogix Weather. Other forecasters have a more sanguine outlook, calling for rain again early next week. Judging by overnight gains in beans, the market seems to want to add a little dry weather premium to prices again. This back and forth trading is typical of weather markets. Brazil will see scattered rain in the south today, mostly Parana state. Rio Grande state will be mostly dry today into early next week, increasing the need for rain there soon. More beneficial rain is forecast for Parana Fri-Sun. Mato Grasso, Brazil's largest bean growing state, will see rain the next two days, delaying early bean harvesting in some areas.

There is a chance for much needed precipitation in the dry areas of the southwest US winter wheat belt early next week.---Vic Lespinasse

Argentina Rainfall Lowers US Grains Overnight

A lower start is forecast in all pits following better than expected rain overnight in Argentina: 5 lower in wheat and corn, 10-15 down in beans. The outside markets are mixed this am with crude oil a little higher while the $ is a little lower, sending mixed signals to the grains.

Iraq is in the market Feb 8 for optional origin wheat. Pakistan bought 172,000 tonnes of optional origin wheat and is in the market for 50,000 tonnes more. They will be back Friday for 250,000 tonnes of US white wheat. The USDA announced this am that Egypt bought 120,000 tonnes of US corn while 25,000 tonnes of US bean oil was sold to an unknown destination.

Traders will be watching for any reaction from the Argentine government to the proposals by the govenors of two of the largest Argentine grain-producing provinces yesterday to cut or eliminate grain export taxes for 3-6 months. If this were done, it would be bearish for US bean export prospects as it would make Argentine bean exports more competitive on the world market.

Reports of lower than normal bean yields in northern Brazilian bean fields are due to lower fertilizer use as well as the hot and dry weather that prevailed early in the season, late last year. Lately, the weather has been very favorable, however, arresting any further crop losses.

Several forecasters are reporting better than expected overnight rain in the main corn and bean growing areas of Argentina. One meteorologist with Argentina's National Weather Service said most areas will see at least 3/4" of welcome rain today. Overnight, up to 1.5" was seen. Generally dry weather is forecast Wednesday with more rain expected Thur-Fri. Dry weather is expected over the weekend. Somar, the widely-followed Brazilian forecaster, is predicting at least .4" rain in most of the major Brazilian corn and bean areas each of the next 5 days, keeping crops there in good shape.

There is a chance for welcome precipitation in the southwest part of the US southwest winter wheat belt early next week.---Vic Lespinasse

Economic Worries Pull Grains Down in Overnight Trading

A lower start is likely in all pits this am, roughly 5 in wheat and corn, 10 in beans. Crude oil is lower and the $ index is higher this am, a bearish combination for the grains. Ongoing economic worries are likely to weigh on prices this am with equities under solid pressure, reflected by the Dow Jones industrials trading below the 8000 level. The Dalian, China grain futures market is open again this am after a one week holiday and prices are mixed.

Some Australian analysts expect Australian wheat planting to fall to about 12-12.5 million hectares vs last year's record 13.5 million. (one hectare = 2.471 acres) This is due to much lower prices this year vs last. Australia's Bureau of Meteorology reported late last week reduced La Nina potential, which could mean a reduction in the threat of dry weather in Argentina and southern Brazil the rest of this season. If this allows for more normal rains in these areas, it would of course be bearish for our bean and corn markets.

Up to .6" of rain fell in Cordoba and Santa Fe provinces of Argentina over the weekend with dry weather elsewhere. It will be dry today but light, scatttered rain is forecast Tue-Thur before dry weather returns late week. Brazil had light, scattered weekend rain with more of the same the next few days expected. Light, scattered rain is forecast in far southern Brazil, Rio Grande, Thur-Sat.