Overnight Developments

eCBOT grains are lower in follow-through trade from last nights weak close. Crude oil fell out of bed late yesterday after the US Energy Dept came out with substantially higher stocks figures than the market had been anticipating.

Crude finished 12% lower on the day, its biggest one-day drop since 2001.

That, coupled with some decent rains in the forecast for Brazil and Argentina over the next few days, have got the market back on the defensive.

Corn is around 6c lower this morning, with wheat down around 10c and soybeans 7-10c easier.

An escalation of the violence in the Middle East overnight has arrested crude oil's decline this morning after several rockets fired from Lebanon hit northern part of Israel. Crude currently hovers around unchanged.

Japan has confirmed a purchase of 127,000mt wheat in a tender today. Most of it - 106,000mt - being of US origin, the rest is Canadian.

South Korea's Major Feedmill Group has bought 45,000mt Brazilian corn for delivery by March 10th.

Weather watchers will be keeping a close eye on developments in South America over the next few days.

In Brazil we seem to have a game of two halves, with some rain in the forecast for developing soybeans across Rio Grande do Sul and Parana during the weekend but more is needed. Meanwhile conditions in Mato Grosso and Goias are generally favourable.

In Argentina forecasts vary from just scattered showers to a fairly widespread rain event. Certainly developing corn will be entering the critical pollination period within the next few weeks and significant rains ahead of this stage would really help the crop. The wheat harvest is nearing completion, and as you probably know by now has been severely reduced by drought.

Australian wheat futures are down heavily overnight, following the lead from CBOT, with most active March ASX milling wheat A$11.50 lower at A$279.00/tonne.

Sterling kept to a narrow, well-defined range in overnight trading as traders brace for the coming interest rate announcement from the Bank of England. Expectations call for a 50 basis point cut to bring rates to 1.50%, the lowest since the central bank’s creation.

The ECB is not due to announce it's decision on rates until Jan 15th. The general mood in the market seems to suggest that, having been slightly more cautious than the BOE recently, maybe a slightly more aggressive stance is required next week.

Base rates here in the UK are currently 2% against 2.5% in the Euro Zone. The anticipated further UK rate cut today would bring the benchmark to the lowest since King William III created the bank in the 17th century.

At 8.45am GMT the pound was steady just under 1.11 against the euro and 41.5045 against the dollar.