Nogger's Blog

Crude Oil Falls Off A Cliff On Stunning Stocks Data

Crude oil futures crashed late Wednesday after the US Energy Dept stocks report showed inventories rising by a truly staggering 6.68 million barrels to 325.4 million barrels last week.

Analysts had been expecting an increase of only around 1 million barrels as US refineries operate at historically low levels to combat the glut of oil in the market.

In fact data showed that refinery activity increased by 2.1 percentage points to 84.6% of capacity last week.

Gasoline stocks were also forecast to rise by around 1 million barrels, but actually increased by 3.33 million, according to the Energy Dept. figures.

The huge price differential between spot month and forwards, known as contango, seems to be encouraging hoarding of crude. “Look at the contango. You’d be an idiot not to take advantage of that,” said one trader.

The Feb 2010 crude oil price is a massive 41% higher than the spot month Feb 2009. It seems that only in the peculiar set of circumstances we have at the moment can that situation prevail. In previous years of easy credit every man and his dog would be storing oil.

US fuel consumption during the four weeks ended Jan. 2 averaged 20.1 million barrels a day, down 2.9 percent from a year earlier, the Energy Department report showed.

Analysts Estimate US Winter Wheat Seedings Lower - But How Much?

Perhaps the most eagerly awaited out of a raft of USDA data due for release Monday is the US winter wheat plantings estimate.

Everybody seems to agree that acreage will be lower, but by how much exactly?

All wheat 2008 acres were 46.181 million.

The lowest estimate on the radar for the 2009 crop is 42.92 million acres from North American Risk Management. The highest is 45.80 million acres from Citigroup. That's quite a wide range we have here, 7% down from NARM and less than 1% lower from Citigroup.

It's amazing who emails me these days as Nogger's Blog becomes more widely read.

For what it's worth I have been hearing some independent reports that a fairly significant reduction is on the cards. Not only that but also, depending on what happens between here and the spring, one way or another final production could be substantially reduced next summer.

Farmers in Arkansas have cut back plantings from 970,000 acres to just 350,000 acres of soft red winter wheat this fall, according to my info.

Not only that, but with the price of nitrogen an phosphorus still "very high" my informant says that come February, some farmers “may decide not to fertilize and just plow up what they’ve got.”

You can tell I'm not making this up because there is no z in fertilise nor any w in plough.

Basis was the killer for US farmers last season, those that thought they'd sold at a good price got shafted when they found that the differential between futures price and cash price was $2.50/bushel.

He netted just $3/bushel in the end for his wheat. Not a princely sum then, even less attractive back in September when the planting decisions were being made based on potential selling & fertiliser prices then.

USDA Attaché Lowers Argy Wheat And Corn Crop Estimates

The USDA attaché in Argentina has lowered his estimates for the current wheat and corn crop due to drought.

The wheat crop is now estimated at 9.5mmt, and the corn crop at 16.5mmt.

Wheat exports for the coming season are now expected to fall to 4.2mmt and corn exports to 9mmt.

Around 92% of the current wheat crop is harvested, yielding an average of just 2.3mt/hectare, around a third of what we would expect to get in Europe.

EU Wheat Futures End Lower

EU wheat futures closed lower Wednesday, in a technical correction from recent gains as the dollar fell across the board.

Paris March milling wheat closed down EUR4.25 at EUR147.25/tonne, whilst London March feed wheat closed down GBP0.80 at GBP111.45/tonne.

Yesterday's heavy volume was missing today with only around half the number of lots traded.

Sharply weaker crude oil weighed on the market later in the session as did lower equities once America opened.

Sub-zero temperatures across much of Europe may be having an impact on winter wheat. Damage may have affected 15-20% of the Polish wheat crop according to analysts MDA EarthSat Weather Services.

The crop there was already estimated 6-8% lower than 2008's crop of 9.28mmt before temperatures plunged to minus 10 degrees recently.

Egypt is tendering tomorrow for 55-60,000 US/Argy/Kazakh or Canadian wheat along with 25-60,000mt Russian/Ukraine/French or UK milling wheat.

I think we can guess where the latter order will go.

The US attaché in Argentina has lowered his estimate for this current season's crop to 9.5mmt citing "severe drought and export policy factors that impacted negatively on this year's crop."

CBOT Closing Comments

Corn

March corn closed lower in Wednesday's session. A bearish trading session since this morning across the commodities board, a sharp drop in crude oil and a weaker US dollar added up to bearish pressure on corn. Anticipation of the upcoming Monday's USDA reports supplemented to the bearish leanings, with longs taking some money off the table. This morning South Korea announced that its largest feed maker may cut corn imports by 20%. South Korea is the 3rd largest importer of US corn. This news hurts US exports of corn, adding to the bear pull. March corn closed at $4.16 1/2, down 11 cents; December corn closed at $4.60 1/2, 10 3/4 cents

Soybeans

Soy complex futures finished lower this trading session. A weaker crude oil and bearish pull across commodities provided the selling pressure to soy complex futures this entire session. Wetter weather conditions later this week are forecasted in key soy crop areas in Argentina. That, coupled with the outlook for increased US soy seedings in 2009 (because of the rally) added pressure for US soy. Like other grains, outside markets on top of fundamental news took away yesterday's gains of soy complex futures. January soybean finished at $9.90, down 24 1/4 cents; January soy meal finished at $295.00, down $5.30; January soy oil finished at $35.92, down $1.13.

Wheat

March wheat futures in Chicago, Kansas City, and Minneapolis settled lower in today's session, taking away most of yesterday's gains. Spillover bearish pressure in grains and a renewed dismal economic outlook such as increased job losses for 2009 provided the backdrop to wheat's losses. Weaker crude oil and a bearish US stock market added more bear pressure to wheat. Recent foreign tenders for wheat are expected not to consider US wheat due to US crop being too expensive relative to cheaper, namely Black Sea and Northern European sources. Stiffer foreign competition of wheat exports continues to plague US wheat. Continuing cold weather is not considered a major threat to wheat crops in the Plains although the lack of snow cover could be an issue if temps get below zero. Wheat losses were tempered a little bit by the weakness in the US dollar. March CBOT wheat at $6.13 1/4, down 30 1/4 cents; March KCBT wheat at $6.37, down 33 cents; March MGEX wheat at $6.64, down 20 1/2 cents.

Finally Some Rain In The Forecast For South America

Some rain is finally in the forecast for parched areas of Argentina and Brazil over the newxt week or so.

Starting tonight a weather sytstem including "a significant rain event" will move across Argentina's Cordoba state, spreading across northern parts of the Argentine growing region for tomorrow, tomorrow night, and into early parts of Friday. That same system may also spread rain into southern Brazil over the weekend, forecasters say.

The Monday-Tuesday time frame of next week should feature further rainfall chances in Argentina, and that system will also eventually move into southern Brazilian growing areas.

Southern Argentina is forecast to remain largely dry next week, with only isolated scattered showers and thunderstorms.

The northern third of the main Argentine corn/soybean growing area, as well as key growing areas of southern Paraguay, southern Parana, Santa Catarina, and Rio Grande do Sul could do quite well on rainfall over the next week.

Temperatures are forecast to remain very warm, in the 90-95 degree region.

Four Day Forecast:

Thurs

Fri

Sat

Sun

The Domino Effect

Despite the general air of doom and gloom on the High Street, fast food appears to be the market to be in.

Domino's, the pizza delivery firm which has 553 stores in the UK and Ireland, says people are looking to "trade down" from going out for a meal but were unwilling to give up entirely on luxuries.

Sales for the year to 28 December were up 18.4 per cent to £350.8m, while like-for-like sales grew 10 per cent for the same period.

Domino's say that the company's sponsorship of the Saturday night TV show Britain's Got Talent had proved successful, with sales perceptibly rising around the time the programme was broadcast.

Meanwhile fast-food giant McDonalds says it is now serving 100 million customers a month via it's 1,200 retail outlets in the UK.

What a sad indictment of our country this is.

Pound Benefits From Weaker Dollar And Euro

The pound is up above $1.51 against the dollar and 1.10 against the euro this afternoon following weak jobs and other economic data from the US and the Euro Zone.

In the US an ADP employment report that showed non-farm private employment fell by 693,000 jobs in December, compared to analysts predictions of 450,000.

In Europe, Eurostat revealed that the Euro zone industrial producer price index (PPI) rose 3.3% year-over-year in November, slower than the 6.3% recorded in the previous month. Economists were looking for the rate of 4.4%.

Other data shows that unemployment in Germany rose 18,000 in December, against expectations of a 10,000 increase.

Latest live forex rates can now be found on the righthand side of this blog below futures prices.

eCBOT Close/Early Call

eCBOT grains closed lower Wednesday, consolidating fro recent gains. Beans and wheat ended the overnight session with losses of around 7-8 cents, with corn around 3-4 cents lower.

Most active March beans pushed to three month highs yesterday, breaching through $10/bushel to close at $10.16/bu. Despite overnight selling pressure, March managed to hold above the $10/bu mark finishing at $10.08 3/4 after getting as low as $10.02 at one stage.

Crude is a fraction lower, but underpinned by the Middle East situation and Russia and it's gas shenanigans.

Japan has bought 176,000mt optional origin barley and 11,000mt optional origin wheat overnight. South Korea bought 45,000mt Brazilian corn.

Japan is also expected to conclude a tender deal for US and Canadian wheat tomorrow.

The dollar is down on poor jobs data, with the pound hitting $1.51 as I type.

Weather in Argentina and southern Brazil remains as serious concern, although there could finally be some relief in sight over the next few days for central & northern Argentina.

Informa yesterday dropped it's Brazilian soybean output estimate for 2009 by 1mmt to 59mmt.

The funds are back in town too, if only cautiously.

Early calls are lower in line with the overnight markets: Corn futures are expected to open 2 to 3 lower, soybeans 5 to 7 lower and wheat 6 to 8 lower.

UK: Barclays Announce Job Cuts

Barclays Bank PLC said Wednesday it was cutting more than 400 UK-based technology jobs after a review of its operations.

The cuts will affect permanent IT staff and some contractors mostly based in London and Cheshire, the bank said.

Barclays employs around 63,000 UK staff out of a worldwide total of 150,000.

Market Snippets

Australian ASX March milling wheat closes up A$7 at A$290.50 Wednesday, supported by recent CBOT gains. The contract has now bounced almost A$40/tonne from a low of A$251/tonne set on Dec. 12th.

Informa drops it's Brazilian soybean crop estimate for 2009 by 1mmt, Argy soybean output is left unchanged.

The USDA are out Monday with a 2009/10 US winter wheat plantings figure, with a reduction of anywhere from 1-3 million acres being touted. Slightly lower figures are expected for US 2008 corn and soybean production numbers.

Crude oil eases slightly ahead of US stocks data due for release this afternoon. Crude and gasoline stocks are expected to increase by around 1m barrels each last week.

Russia has cut all gas supplies to Europe through Ukraine just before 6am GMT Wednesday according to Ukrainian utility NAK Naftogaz Ukrainy.

Marks & Spencer added to the High Street gloom yesterday by announcing its worst quarterly sales performance for a decade and said it would cut around 1,230 jobs in a bid to save money in a tough trading environment.

The Mosaic Company, the largely Cargill-owned fertiliser manufacturer, announced Tuesday net earnings of $959.8 million, or $2.15 per diluted share, for the second quarter ended November 30, 2008.

The Bank of England is set to vote for another interest rate cut on Thursday this week, bringing the base rate to below 2% for the first time since the central bank was founded in 1694.

eCBOT grains are lower overnight in consolidation from recent gains. Soybeans and wheat hit three-month highs in Chicago last night with corn posting two-month highs.

A 19-year-old Beijing woman has died of bird flu, the first human case of the virus in China since February last year.

Overnight Markets

eCBOT grains are lower overnight in consolidation from recent gains. Soybeans and wheat hit three-month highs in Chicago last night with corn posting two-month highs.

This morning beans are around 5-12c easier, with corn down around 4c and wheat around 7c lower.

Crude oil is almost a dollar easier around $48/barrel, ahead of US stocks data later today which is expected to show another increase in crude and gasoline inventories.

The dollar is also a little firmer, which is adding to the slightly more negative tone.

The pound is down against a broadly firmer euro ahead of tomorrows BOE announcement on interest rates. A further half point cut is widely anticipated.

After that attention may start to focus on what the ECB are up to with rates in the eurozone.

Just after 10am GMT the pound was 1.0939 against the euro and $1.4868 against the dollar.

London wheat has opened slightly easier, with March down GBP0.25/tonne at GBP112.00/tonne.

UK Interest Rates Set To Hit All-Time Low

The Bank of England is set to vote for another interest rate cut on Thursday this week, bringing the base rate to below 2% for the first time since the central bank was founded in 1694.

If the central bank’s Monetary Policy Committee (MPC) does cut rates, then January will be the fourth consecutive month the base rate has been reduced; in October it fell by 0.5% to 4.5%, in November the MPC unveiled a surprise 1.5% cut to 3% and in December it voted to lower rates by 100 basis points to just 2%.

But the MPC has indicated that rates need to fall even lower. The minutes from their December meeting show the nine members did discuss cutting rates by more than 1%, but eventually ruled this move out amid fears it could signal a lack of confidence in the economy and damage the value of the pound.

Lower interest rates may be designed to help consumers weather the financial storm, but all the evidence suggests that borrowers are still not fully benefiting from cuts.

According to data provider Moneyfacts, one month on from December’s 1% cut and many banks have been quick to slash savings rates but altogether slower to reduce mortgage costs.

It reports that 77% of providers have cut their savings rates with the majority opting to pass on the full cut or more.

In contrast, Moneyfacts says that while 76% of mortgage lenders have announced a cut to their standard variable rate (SVR), only 19 lenders have opted to pass the cut on in full.

Almost three-quarters (72%) of those that have announced opted to pass on between 0.15% and 0.99%, amongst them some of the UK’s biggest mortgage lenders.

Mosaic Q2 Results

The Mosaic Company, the largely Cargill-owned fertiliser manufacturer, announced Tuesday net earnings of $959.8 million, or $2.15 per diluted share, for the second quarter ended November 30, 2008. These results compare with net earnings of $394.0 million, or $0.89 per share, for the second quarter ended November 30, 2007. The Company says it maintains a strong financial position, with cash and cash equivalents of $2.8 billion as of November 30, 2008.

KEY FACTORS

-- Operating earnings were $682.0 million, or 22.7% of net sales, up from $529.6 million, or 24.1% of net sales last year
-- Potash operating earnings more than tripled to $547.5 million
-- The average diammonium phosphate (DAP) selling price was $1,083 per tonne and total phosphate sales volumes were 1.2 million tonnes
-- The average muriate of potash (MOP) selling price was $529 per tonne and total potash sales volumes were 1.7 million tonnes
-- An inventory valuation write-down of $293.5 million, or $0.41 per share, was recorded
-- Mosaic recorded a gain on the sale of its interest in Saskferco of
$673.4 million, or $1.03 per share
-- The Company expects to reduce phosphate and potash production significantly during the remainder of fiscal 2009
-- Results are expected to be weak at least through the fiscal third quarter

Urgently Wanted - Woman With 46FF Chest

Marks & Spencer added to the High Street gloom yesterday by announcing its worst quarterly sales performance for a decade and said it would cut around 1,230 jobs in a bid to save money in a tough trading environment.

UK like-for-like sales fell 7.1 percent in the 13 weeks to Dec. 27, the company said. And they won't be picking up in the January sales either based on the evidence of my own eyes at the weekend.

I thought I'd wandered into Woolies by mistake the shelves were so bare, and what was on the shelves was generally a pretty motley collection of one-offs. Unless you happen to have a missus with a 46FF chest looking for a matching size 8 thong that is.

M&S says it intends to cut it's operating costs by around 1-2% in 2009. This will partly be delivered by closing 27 stores, including 25 from its Simply Food format, with the loss of about 780 jobs, and by cutting up to 450 head office staff.

Putin Off The Gas

Russia has cut all gas supplies to Europe through Ukraine just before 6am GMT Wednesday according to Ukrainian utility NAK Naftogaz Ukrainy.

The move halts all Russian supplies to Austria, the Czech Republic and Slovakia, widening the circle of countries affected by the dispute.

Countries now affected by the dispute: Austria, Bosnia, Bulgaria, Croatia, the Czech Republic, Germany, Greece, France, Hungary, Italy, Macedonia, Poland, Romania, Serbia, Slovakia, Slovenia and Turkey.

The disruption coincides with a particularly cold snap – temperatures dropped to minus 15F (minus 25C) in Serbia – and many countries in eastern and central Europe depend on gas for central heating.

Well, you don't get turkey processors going on strike in January do you?

Another sign of Russia announcing their re-emergence as the new sherriff in town, a la Georgia methinks.

Cold Wars V - The Empire Stikes Back

Crude Eases Slightly

Crude oil is slightly easier in early trade Wednesday, down just over half a dollar at around $48/barrel, after breaking above $50 at one point yesterday.

US Energy Dept data due out later today is expected to show crude oil and gasoline stocks each rising by around 1 million barrels last week as US consumer demand remains weak.

US gasoline consumption fell 3.5 percent last week to a two-month low as the U.S. recession reduced demand, according to MasterCard Inc.

Still, the ongoing problems in the Middle East and the Russian dispute with Ukraine over gas, coupled with OPEC cuts starting to filter through seems to indicate that $45-50/barrel is the right kind of level for oil at the moment.

A twelve month carry on MYMEX is still showing a premium of around $15-16/barrel, which is more than sufficient to cover finance and storage. This is especially so with interest rates effectively at zero and freight costs still so low. There are reports of enquiries in the freight market at the moment for up to ten supertankers, each capable of storing 2m barrels each, to simply load up with crude an sit awaiting further instructions.

It might sound a crazy way of going about things, but the economics really do stack up. Whilst this situation exists it's difficult to see a great deal more downside to crude.

Early Thoughts On Monday's USDA Report

The USDA are out Monday with a raft of production, stocks and planting estimates.

Slightly lower figures are expected for US 2008 corn and soybean production numbers, with the likes of Allendale having corn at 11.965 billion bushels, compared to the USDA's most recent estimate of 12.020 billion.

For soybeans Allendale say 2.916 billion bushels, down 5 million from the last USDA guess.

The really interesting bit, potentially, is the USDA's first estimate on winter wheat plantings. Everyone is expecting fewer acres, but by how much exactly? Allendale are projecting the total planted area at 45.131 million acres, compared to 2008's 46.181 million. Informa are saying much lower at 44.08 million acres. Some other estimates are coming in even lower still.

Additionally, the USDA will be updating quarterly and monthly domestic stocks estimates, along with their world stocks and production numbers. Quarterly soybean stocks are also worth watching, and could come in at a record low of 2.148 billion bushels on strong exports during the first quarter of 2008/09, according to Allendale.

EU Wheat Futures Post Strong Gains

EU wheat futures closed with impressive gains amidst good volume Tuesday, with Paris March milling wheat finishing up EUR8.25, or 5.6%, at EUR151.50/tonne, with 5,698 lots moved. London May feed wheat also closed up strongly +GBP3.30, or 3%, at GBP115.05/tonne, with 534 lots moved.

The rise in London wheat was all the more impressive considering the pound's strong rally against the euro over the last couple of days.

Investment funds were active buyers of wheat, which explains the volume done, in order to re-adjust their portfolios to reflect wheat's revised higher weighting in the Dow Jones-AIG commodities index.

Wheat will now be the eighth largest commodity among the index's 19 commodities, moving up one place from last year.

Widespread sub-zero temperatures across much of the UK and the Continent overnight, and the promise of more to come, raised concerns that some winter wheat crops will suffer winterkill damage.

Crude oil rising by around a third in the first few days of trading since the close of 2008 also lent some support. However, traders are mindful that the Gaza onslaught will hopefully not continue for much longer, and that the Russian problems over gas supplies to and via Ukraine will also be resolved before long.

It may be interesting to note that in Carr's Millings' Q1 report they refer to "fertiliser sales having been much reduced." This is surely not a one-off and in reality typifies the situation across the rest of the UK, much of Europe and possibly even a large part of the world.

An EU-27 wheat crop planted in cold, wet, claggy ground that may be significantly undernourished in the spring could be a real cause for concern when harvest-time finally comes.

Before that of course we still have a huge exportable surplus to dispose of!

The US market has traded higher the last few sessions, despite largely missing out to the Black Sea on any export orders going. The attitude there, for now at least, seems to be let the distressed sellers get out of the market, any export sale is better overall than none.

The USDA are out Monday with a 2009/10 winter wheat plantings figure, with a reduction of anywhere from 1-3 million acres being touted. Crunch time will also come in the spring when US farmers need to decide if the economics make nitrogen and phosphorus application a viable proposition.

CBOT Closing Comments

Corn

March corn futures finished higher in today's session, up 4%. Spillover bullish support from soybeans pushed corn futures to a strong finish. NYMEX crude oil futures traded higher most of the session, which is supportive to corn and ethanol, but pulled back below $49 per barrel after the close of corn trading. A higher US dollar index, a bearish pressure to corn futures, didn't add any major limit to corn's gains. Much of the buying appeared to be tied to ideas about index fund allocations and position squaring prior to Monday's raft of USDA reports. March corn finished at $4.27 1/2, up 16 1/4 cents; December corn finished at $4.71 1/4 , up 16 cents.

Soybeans

Soy complex futures closed higher this session, and rallied to 3-month highs. A firming US dollar didn't add any major bearish pressure to limit soy complex futures' gains, but higher crude oil trading most of the session provided enough bullish support to soy oil. Strong Chinese demand for US soy exports proven by the announced expectation for China this week to purchase up to 800,000 tonnes of US soy which will double its recent weekly purchase, provides additional bullish support. Ongoing drier weather in Brazil and Argentina key crop areas continues to drive yield concerns. Informa Economics release their crop estimates earlier today, where the only major item to note was that they lowered Brazilian soybean production for 2009 by 1 MMT to 59 MMT. Argentine production was left unchanged at 51.7 MMT. This is friendly to US soybean exports because Brazil is the world's second largest producer of soybeans and the smaller production could mean fewer exports unless Brazil draws down its considerable carryover stocks. Soy meal and soy oil received the bullish push from soybeans and from fund buying to close higher on the day. Meal was held back a bit by some oil/meal spread trades. January soybean closed at $10.14 1/4, up 30 1/2 cents; January soy meal closed at $300.30, up $1.60; January soy oil closed at $37.05, up $2.15

Wheat

March wheat futures in Chicago, Kansas City, and Minneapolis settled higher after today's session, rallying to a 3-month high. Spillover bullish support from soybeans and strength from the stock market pushed wheat to rally. The US is still not competitive in most of the wheat tenders, but that doesn't seem to matter. Running out the short sellers is the name of the game. A firming US Dollar Index provided some bearish limitations to wheat futures' gains. Trade estimates for Monday's winter wheat report appear to be running 2 to 3 million acres below last year, and perhaps even lower. The Argentine government has suggested that they may once again cut off wheat exports due to this year's low production. This could force Brazil into the open market to fulfil it's import requirements which could be good news for the US. March CBOT wheat settled at $6.43 1/2, up 26 3/4 cents; March KCBT wheat settled at $6.70, up 27 3/4 cents; March MGEX wheat settled at $6.84 1/2, up 27 1/4 cents.

eCBOT Close/Early Call

Overnight grains closed firmer, with soybeans leading the way posting gains of around 20-22 cents. Corn finished around 6-7c higher, with wheat up around 4-5c.

Crude oil is back above $50/barrel as the situation in Gaza worsens and the Russian gas dispute with Ukraine spreads to other nearby countries.

Kuwait and Qatar announced that they will begin cutting oil shipments to Asia this month as part of the recently announced OPEC cuts.

For crude oil, for the time being at least, the focus seems to be shifting from demand to supply.

Whilst this is obviously beneficial for the grains, other fundamental factors such as drought concerns in South America are also playing a significant role in soybean's rally to three month highs.

Temperatures well into the 90's and only scattered showers are in the forecast this week for much of Argentina and Southern Brazil.

There seems to be a pick up in world demand recently too. Even if tenders have largely not been going the was of the US, export business still takes some of the surplus world supply off the market.

Pakistan and Iraq have both bought around half a million tonnes of wheat in recent tenders. Japan is in the market for US and Canadian wheat this week, and Jordan is tendering for 100,000mt optional origin wheat. South Korea are tendering for corn and the Philippines are sniffing for 300,000mt corn by the end of March.

China too continues to be in the market as the government there supports domestic prices to such an extent that feed mills there find it cheaper to buy from abroad. The USDA this afternoon announced export sales to China of 232,000mt soybeans.

A more significant factor than any of this though is that we are beginning to see the funds back in the market. I've been saying for a while now that with interest rates effectively zero, agricultural commodities are possibly seen as the best of a bad bunch, from an investment proposition.

Traditional large speculative traders now hold 14,424 net long positions in CBOT soybean futures and options combined contracts as of Dec. 30, compared with net longs of 7,315 in the previous week, according to CFTC.

Speculative funds are also being seen cutting their shorts in wheat, according to the CFTC.

Early calls for this afternoon's CBOT session: Corn Up 5-7c, Wheat Up 4-6c,Soy Up 15-20c.

Carr's Milling Industries PLC - Interim Management/AGM Statement Q1 2008/09

Carr's Milling Industries Plc., the fully-listed agriculture, food and engineering group, said its profit in the first quarter of the current financial year ending Aug. 29, 2009, was ahead of budget.

The company said it remained on target for the full year, despite trading conditions becoming more difficult.

"Overall, the Group remains well-placed for the current year, albeit without the benefit of exceptional trading conditions in its largest Division, Agriculture," the company added.

Agriculture

In compound and blended feed, Carr's has maintained its market share. However, volumes are down, reflecting a reduction in bought-in feed following the higher yields of last year's cereal harvest. With feed raw materials bought forward at higher than spot prices, margins have started to be squeezed.

Market share gains were made in the feed block businesses and revenues were ahead in each of the UK, Germany and the USA.

Since November, fertiliser sales have been much reduced in expectation by farmers of selling price reductions which may turn out to be overestimated.

First quarter revenue from retail and machinery sales is ahead of both budget and last year.

Further growth was achieved in the fuel oil business, with increases in both volume and revenue.

Food

As predicted, this year has started much better than last for flour, following the price rises put through in September and November 2007. The first quarter profit is ahead of last year and in line with budget. The market remains competitive and market share is being maintained. Forward wheat contracts are in place to safeguard margins.

Engineering

The Engineering businesses were busy and profit in the first quarter was ahead of last year. The order book remains strong and the enquiry level is encouraging.

Carr's shares were +5 (+1.2%) at 435 pence in early afternoon trade.

Mole Valley Sales Up By A Third

Mole Valley Farmers reports an annual turnover for the year to 30th September 2008 of a record £243.3 million, 32.6% higher than the previous years record of £183.5 million.

Like many other agricultural businesses sales turnover was boosted by exceptional price increases in commodities.

The Agricultural Division increased sales to more than £110 million, 45% of the company's turnover. Meanwhile Mole Valley Farmers' Retail Division also performed well with sales increasing to approximately £107 million.

Total net assets increased by 11.5% to £27.3 million and profit before taxation to £3.6 million.

Euro Under Pressure On Rate Outlook

The euro is under renewed pressure today, just a day after the single currency's biggest ever one-day fall against sterling Monday.

The European Union's statistics office Eurostat said inflation in the 15 countries using the euro in December was up just 1.6 percent on a year earlier. That was down from 2.1 percent in November and well below the ECB's target of just under 2 percent.

Inflation could now possibly be close to zero in the spring, analysts are saying, piling the pressure on the ECB to slash rates in the coming months by a further 150 basis points to 1%.

The ECB meets to discuss rates next week. Markets have largely priced in a 50 basis point cut, with some investors betting on a 75 basis point move after the last such reduction in December.

The pound currently stands around 1.09 against the euro.

NFU Condemn Arla And First Milk

The NFU has condemned Arla and First Milk's recently announced price cuts as 'unjustified' and 'disappointing' saying that they are “exploiting the poor one-sided contract“ with farmers.

Not surprisingly neither company sees it quite that way.

Arla blames the reduction on a falling commodities market, the effects of which it says it absorbed in the second half of 2008. Meanwhile First Milk blames the European milk price slide which it says is now affecting the UK.

An unidentified NFU spokesman offered to take the Arla and First Milk executives on in the car park for a fight, according to reports circulating in my head.

Nogger betting on the winner of this intriguing three-way bout:

Unidentified NFU punter, probably a big strapping ex-farmer type 4/6 fav

First Milk Chief Executive Peter Humphreys, probably not had a fight since he was twelve 3/1

Hanne Sondergaard, deputy CEO of Arla Foods UK (could be a woman with a name like that) 12/1

Win only.

Noble Foods To Establish New Free-Range Egg Brand

Noble Foods has said it will spend GBP1-2 million in a spring TV advertising campaign in a bid to help establish a new free-range national egg brand, reports the Farmers' Weekly.

Farmers will have to wait a few years however for the anticipated 15% price premium to filter down to producer level.

Likening the development to the establishment of the Cathedral City cheese brand, Noble's CEO Peter Thornton told members of the Midlands Free Range Discussion Group that "it's not something that pays back immediately."

Emphasising the mutual benefits, Mr Thornton said: "We're always going to have the cut and thrust of pricing negotiations with customers, but if we can take a big part of the egg market like that it can only benefit us all."

I wonder if they've considered putting a worthless plastic toy inside each egg yet and calling it a Kindred Egg? The kids would love it.

If In Doubt Blame The Parents

You've got to hand it to the Chinese, these lads are world beaters at mishandling a situation. Just days after it was revealed that the authorities there knew all about the melamine in infant formula scandal, but chose not to say anything in public until after the Olympics, it now seems that they have arrested some of the parents involved.

The parents crime? They were planning to speak to hold a press conference.

After the arrests, the parents were taken to a work camp just outside Beijing, just for a quiet word presumably.

The five parents involved were preparing to speak to the media to call for better compensation and treatment for sick children in China when they were detained Thursday evening.

UK: FSA To Lift Short Selling Ban

The Financial Services Authority (FSA) is to lift the ban on short selling of financial shares in the UK, according to reports.

The FSA said the ban would expire as planned on 16 January, despite calls from some MPs to keep it in place.

Grain News Snippets

Japan plans to buy 106,000mt of milling wheat from the U.S and 21,000mmt from Canada for March shipment in tender due to be completed Thursday.

Jordan are tendering fro 100,000mt optional origin wheat, due for completion 21st jan.

South Korea is seeking 55,000mt of corn for feed production at a tender tomorrow.

Philippine feed millers are seeking to import up to 300,000mt of optional origin corn free of import tariffs due to high domestic prices. The corn would be for shipment by end-March.

India says that it expects this season's wheat crop due to be harvested in March/April to be similar in size to 2008's 78.4mmt.

Australian ASX milling wheat futures close up A$2-A$3 Tuesday.

Belarus says it harvested a record 9mmt grains and oilseeds in 2008, 25% more than in 2007.

Dunn Commodities Latest

A notice of intention to appoint an administrator for Dunn Commodities Ltd., the trading and broking house founded by Greg Dunn based at Elsham in North Lincolnshire, was lodged with a court in Leeds on 30th December 2008.

It is likely that the company will formally enter administration under the direction of Begbies Traynor by the end of this week, Nogger gathers.

Mr Dunn tells Nogger Towers that the reasons for the company failure are principally large currency losses over the period September 2007 to July 2008, an unresolved quality claim by a food manufacturer with attendant costs of servicing the account, and a sharp downturn in trading used cooking oil for use in biodiesel production in Germany.

Germany's biodiesel industry has only been running at about 15 percent of capacity in 2008, largely because of high taxes, and large numbers of producers there are facing closure. But the again, they did bomb our chippie.

Overnight Markets - Soybeans Surge To 3-Month Highs

Soybeans have surged to 3-month highs overnight on continued weather concerns in South America, the ongoing problems in Gaza, and the Russian gas dispute spreading to other EU and Balkan countries.

It may have escaped your notice but crude oil is actually up by almost a third since the close of 2008. Israeli forces have widened their attacks in the Gaza Strip to include Khan Younis in the south, reports say. The fresh attack follows heavy fighting overnight near Gaza City in the north.

In the ongoing dispute with Ukraine over gas, Russia (who supplies a quarter of Europe's gas) has also cut supplies by up to two thirds to Bulgaria, Turkey, Greece and Macedonia in recent days sending spot gas prices soaring yesterday.

Soybeans and corn in Brazil and Argentina are hurting from hot & dry weather, with parts of Southern Brazil and much of Argentina getting 25% or less normal rainfall during December.

The situation is particularly acute in Argentina, where a year-long drought has already reduced this season's wheat crop by almost half.

At 9.30am GMT soybeans on the overnight eCBOT market were 15-16c higher, with corn up around 3c and wheat down 1c. Crude oil is hovering around unchanged close to $49/barrel, almost $12, or 32%, higher than it's Dec 31st 2008 close of $37.21/barrel.

Pound Surges Against Euro

Just when parity seemed like an inevitable conclusion, the pound has reversed the trend and yesterday posted its largest ever one-day gain against the euro.

The reason? Ideas that recent ECB rate cuts have been insufficient, whilst the BOE has been more aggressive with its rate reductions.

The ECB meets next week to discuss further possible cuts, with a reduction of a half point to 2% seen as highly likely.

But it's not all sunshine & roses for sterling either, UK house prices fell by 15.9% last year, according to the latest survey by the Nationwide building society.

It says prices fell by another 2.5% in December taking the average house price down to £153,048 - £29,000 less than a year ago.

The BOE is meeting this week, and it too is expected to cut interest rates again, probably by a half point also to an all-time low of 1.5%.

With UK, EU and US interest rates all so low the major central banks may soon have to start to focus on alternative ways of stimulating an economic recovery.

At 9.20am GMT the pound was worth 1.0933 euros, and a little over $1.47 against the dollar.

Russia Cuts Gas Supplies To Europe And Balkans

Other European and Balkan countries have got caught up in the ongoing dispute over gas supplies between Russia and Ukraine.

Since supplies to Ukraine were turned off on 1st January, Gazprom, the Russian gas exporter, says it has cut gas shipments to Europe piped through Ukraine to 92 million cubic meters, less than one third of normal levels.

With temperatures across Eastern Europe plunging, Gazprom have cut supplies to Bulgaria, Turkey, Greece and Macedonia at the Ukrainian-Romanian border, according to Bulgaria’s Energy Ministry.

UK gas for immediate delivery gained 8.7 percent yesterday.

Tyson Chief Exits Stage Left

Shares in Tyson Foods Inc. fell 6 percent to $8.79 Monday after the world's largest meat producer said it's Chief Executive Officer Dickie Bond is leaving the company, effective immediately.

Bond, 61, had been president and CEO since May 2006 and had been a member of the board since 2001.

Tyson was hurt by wildly fluctuating feed prices in 2008, but analysts expected that it was better placed than most of it's rivals, such as Pilgrim's Pride Corp., by virtue of it's more diverse nature, to weather the current economic storm.

Pilgrim's Pride, the largest US chicken producer, was forced to file for Chapter-11 bankruptcy protection at the beginning of last month.

Despite the turmoil in the markets and plunging profits from it's poultry interests Tyson has hitherto steadfastly refused to cut production at it's US facilities.

Leland Tollett, 71, who was Tyson chairman and CEO from 1995 to 1998, will return as president and CEO on an interim basis until a successor to Bond is chosen, the company said.

US Auto Sales Plunge

US auto sales plunged 36 percent in December, figures released Monday show, with the industry's annual volume hitting a 16-year low.

Chrysler led the way with a sales slump of 53% in December, with Ford posting a decline of 32%, closely followed by GM at 31%.

But US manufacturers weren't the only one hit, Toyota, the world's largest automaker, posted a sales drop of 37%, followed by Honda at 35% and Nissan at 31%.

The figures come just a couple of weeks after GM and Chrysler secured a $17.4 billion bailout from the U.S. government.

But this isn't just a US problem, figures also released today show that sales in France declined 16%, and sales in Spain almost 50% last month.

This one is surely going to get far worse before it gets better. The question now seems to be what happens if & when the bailout money runs out, as it surely will before things turn around?

EU Wheat Ends Monday's Session Mixed

Eu wheat futures closed mixed, with Paris wheat higher on a weak euro and London wheat lower on a stronger pound.

Paris March milling wheat ended up EUR4.75 at EUR143.00/tonne, whilst London May feed wheat closed down GBP2.50 at GBP111.75/tonne.

As mentioned on the blog over the weekend, London wheat has appreciated around GBP20/tonne since contract lows set in early December, and I guess that at least a bit of that rally was overdone, particularly in very thin holiday trade.

The pound bounced from under 1.04 against the euro in early trade to close close to 1.08 at the end of the day, halting December's steep decline.

Cold air sweeping in from the east has provided snow cover for dormant wheat across many parts of Europe, which will protect plants from winterkill as temperatures plunge well below zero in all but the most northerly regions tonight.

Crude oil was sharply higher, lending some support, as tensions in the Middle East increase and Russia digs it's heels in with Ukraine over gas supplies.

CBOT Closing Comments Mon 5th Jan

Corn

March corn futures closed lower in today's session. Overnight trading saw corn futures lower taking away some of Friday's gains. A strengthening US dollar added bearish pressure to corn which was already weakened by competition from cheaper foreign feed wheat. The dollar strength is in part due to expectations of interest rate cuts by foreign central banks and the upcoming US administration's economic stimulus package along with tax reform. These two outweigh the higher crude oil and support from soybean influences on corn. Weekly export inspections were also well below those of the same week a year earlier. March corn closed at $4.11 1/4, down 1 cent; December corn closed at $4.55 1/4, also down 1 cent.

Soybeans

Soy complex futures finished mixed this session. Soybean futures and soy oil finished higher, while soy meal finished lower. A firmer US dollar added bearish pressure to soy meal. A rising crude oil driven by the recent Israeli-Palestinian conflict, Russian-Ukrainian gas dispute, and a pipeline explosion in Nigeria provided enough bullish influence to overcome the firming US dollar bear pull to soy oil futures. Soybean futures reached a 3-month peak in part due to higher soy oil product value, solid export inspections (year to date is 55 million bushels above last year) and enough ongoing drier weather in Brazil and Argentina to maintain yield concerns. January soybean finished at $9.83 3/4, up 13 3/4 cents; January soy meal finished at $298.70, down $2.30; January soy oil finished at $34.90, up $1.32.

Wheat

March wheat futures in Chicago, Kansas City, and Minneapolis settled higher after trading lower most of this session. A firming US Dollar Index allowed the market to erase this past Friday's gains on wheat futures and kept wheat below its opening value, up until later during the day where wheat received spillover bullish support from soybeans to reach a 3-month high. On top of a stronger US dollar, weaker export shipments and no cold weather threats in the wheat belt limited gains to wheat futures. March CBOT wheat settled at $6.16 3/4, up 5 3/4 cents; March KCBT wheat settled at $6.42 1/4, up 8 3/4 cents; March MGEX wheat settled at $6.57 1/3, up 2 cents.

eCBOT Close/Early Call

eCBOT grains closed mixed, mostly lower, in the first overnight session of 2009, with wheat down 11-13c, corn 5-6c easier and soybeans around a cent firmer.

All three commodities staged something of a revival in December, having earlier dropped steeply from all-time highs set earlier in the year.

It may take a week or so for traders to "get their feet back under the table" and access what they want to do in 2009.

As ever it looks like another interesting year.

For the near-term, the trade must decide how to weigh up the complexities of a variety of conflicting factors:

• The ongoing credit crisis
  
• The Middle East problems and the implications for crude oil prices
  
• South American weather concerns
  
• A strong dollar

• US spring plantings
  
• The demand for corn from the US ethanol sector
  
• Global crop weather, and the implications on yields
  
• If and/or when are the funds coming back into the market

UK Oilseed Plantings 2009/10

Strategie Grains are forecasting the UK oilseed rape acreage for the 2009/10 crop at 551,000 ha, down 8% from 599,000 ha in 2008/2009.

Influential Midlands grain broker Robert Kerr, says that he expects that the final reduction will be substantially more than that, and that he anticipates a crop "at least 15% lower, quite possibly 20-25% lower."

Meanwhile, Strategie Grains see a significant increase in feed bean plantings for 2009/10 to 160,000 ha, up more than 35% from 118,000 ha in 2008/09.

Feed pea plantings will be 34,000 ha, they say, up 21% from 28,000 ha in 2008/09.

Indian Wheat Farmers Warn Of Lower Production On Fertiliser Shortage

Indian wheat farmers are protesting against what they see as "profiteering" and "hoarding" of urea by fertiliser dealers.

The government set the factory rate at which urea can be sold at Rs625 and dealers’ commission per bag is Rs10, taking the consumer price to Rs635, but there is no urea available at this price farmers say.

If you want urea, you must pay Rs1,000/bag, which is beyond the purchasing power of poor farmers, said Hazoor Bakhsh, a progressive farmer from Kot Sultan, Layyah. Wheat sowing is at its peak but neither seed nor urea was available in the market, as profiteers had stocked the commodities for black-marketing, he added.

Farmers’ representatives say dealers are fleecing the poor farmers without any check. They say on the one hand the government spent millions of rupees to mobilise farmers to grow more wheat, but on the other it is not taking any step to check black marketing and shortage of fertilisers.

They say the urea shortage will affect this seasons wheat crop and government efforts to avoid a wheat shortage in the coming season will all be in vain.

India produced 78.4mmt of wheat in 2008, and official government estimates are that it will produce a similar amount, possibly slightly more in 2009 when it begins harvesting it's crop in March.

NFU President Paints Bleak Picture For UK Agriculture In 2009

NFU President Peter Kendall said in his New Year message that while demand for food should remain steady the production of home-grown goods could plummet in 2009. He said: “In talking at length to farmers across the country, many of them report some real threats to their businesses. The credit squeeze is making a major dent in producers’ confidence in dealing with the high costs of farm inputs like animal feed, fertiliser and diesel.

“Dairy farmers tell me that milk production will fall to perilously low levels, and I know from my own farm that wheat production could tumble as arable farmers contend with the legacy of poor autumn sowing and growing conditions.

“Sheep farmers are appalled at the prospect of the hugely complex and, frankly, pointless prospect of electronically tagging every one of their sheep. The horticultural sector is being squeezed remorselessly by the retailers who are continuing to use ruthless methods when dealing with suppliers in order to keep their costs down.”

Mr Kendall expressed particular concern for the dairy industry where production has fallen to a level which requires an increasing reliance on imports. He said: “Many dairy farmers are anxiously waiting to see whether the spring will bring stability, or the same price pressures that have seen a collapse in prices around the EU. On top of that they are facing costs in excess of £50,000 per farm to install slurry storage to meet EU regulations.

“Last year's wheat harvest was both the biggest and the wettest in memory. Up to between ten and 15% of land now lies unsown and many crops around the country have failed to grow because of the cool, wet autumn and winter. I anticipate that last year's record harvest may be followed by an equally dramatic fall in production during 2009, turning the UK from a net exporter into a break-even position.

“As the UK economy enters a full-blown recession, farming, as the UK's largest primary onshore industry, could be one of the bright sparks, helping to deliver segments of the rural economy from the gloom. But that simply won’t happen unless farmers get the recognition they deserve from regulators and retailers.”

Salmon 'Foot And Mouth' Hits Scotland

A highly infectious and lethal fish disease dubbed "foot and mouth for salmon" has been confirmed in Scotland, following routine inspections.

An outbreak of Infectious Salmon Anaemia (ISA) has been confirmed at one salmon farm in the Burra area, west of Shetland. Two further suspected cases are also located nearby.

A previous outbreak of the disease a decade ago cost the Scottish salmon industry £37m and 200 jobs, with leading supermarkets refusing to sell the fish if it had originated from any of the 35 farms suspected or confirmed as having the disease.

The farm where ISA has been confirmed has been empty of fish since December 21. A control zone and a wider surveillance zone have been established, with movement restrictions in place.

A team of fish health inspectors is being sent to Shetland to investigate the affected sites and advise salmon farming firms there on how to operate under the restrictions.

The disease, first recorded in Norway in 1984 and then in Canada in 1996, reached Scotland in May 1998 at a salmon farm run by a Norwegian firm, Hydro Seafood, on Loch Nevis, near Mallaig. That year, 10 confirmed cases were established.

Scottish Executive investigators at the time suspected the disease was imported on inadequately-disinfected equipment from Norway, although this was difficult to prove.

However, virtually all subsequent outbreaks were traced back to the farm.

After protective measures were introduced, the figure fell to just one in 1999 and by 2000 the industry had a clean bill of health.

The disease can be spread by blood, mucus and sea lice in the water.

Arla And First Milk Announce Price Cuts

Arla and First Milk have both announced producer price cuts with immediate effect.

Arla has dropped it's standard price by 2ppl from January 5 while First Milk has cut by 1.25ppl from January 1.

Arla blames the reduction on a falling commodities market, the effects of which it says it absorbed in the second half of 2008. Meanwhile First Milk blames the European milk price slide which it says is now affecting the UK.

Chinese Firms Apologise

In a bizarre move, Chinese dairy firms at the centre of the melamine scandal that killed at least six babies and made 290,000 ill, sent out a New Year text message apologising for their actions and begging forgiveness.

Well, I don't know about you, but I'd say there's nothing more sincere and truly heartfelt in this day & age than a text message is there?

"We are deeply sorry for the harm caused to the children and the society," the text message read.

"We sincerely apologise for that and we beg your forgiveness."

Sanlu, the now bankrupt firm at the centre of the scandal, said it discovered the problem and reported it to local authorities in Hebei Province on Aug. 2, just days before the Olympic Games began in Beijing.

This bit won't surprise you, nothing became public on the issue until after the Olympics had finished.

So that's the end of the matter. Yes, I know six babies DIED and 290,000 were made ILL in the name of blatant profiteering with no regard whatsoever for human life, but hey, it's not like they are running their own people over with tanks is it?

Overnight Developments

A relatively quiet start to 2009 so far, with eCBOT grains lower, despite a steadier crude oil market.

Overnight wheat is down around 8-11 cents, corn off around 6c and soybeans 4-5c easier.

Crude is firmer on escalating tensions in the Middle East, but the grains seem to be continuing to divorce themselves from the energy sector.

South American weather is still a concern, although rains of over an inch fell in parts of Brazil across the weekend. More rain is needed for any remaining planting and developing soybeans through Rio Grande do Sul and Parana. Largely favourable conditions exist across Mato Grosso.

Argentina is more of a concern, with mostly dry conditions or just a few light showers forecast Wednesday through Friday. Temperatures are expected to remain above normal during this period.

The wheat harvest is well advanced, unhindered by rain, but significant crop losses are anticipated due to lower plantings and persistent drought. Expect a crop of around 9mmt, down 44% on last season's 16mmt.

Iraq has bought 500,000mt wheat in a tender, half Black Sea origin and half Canadian. This follows on from Pakistan purchasing a similar quantity of Black Sea wheat just before Christmas, and Egypt buying 100,000mt Russian wheat around the same time.

The pound is steady, possibly for the last time in 2009 (!), around $1.45 against the dollar and 1.06 against the euro.

Crude Steady As Middle East Situation Escalates

Crude is steady around $47/barrel in early trade Monday after Israeli troops entered the Gaza Strip, escalating the 10-day-old conflict and threatening stability in the Middle East.

An Iranian military commander reportedly called for an oil boycott over Israel's offensive.

With the Middle East the largest oil-producing region in the world, accounting for almost a third of global output, the market remains nervous that the violence could widen.

While the violence does not directly threaten any oil supplies, the risk is it could engulf other Middle East countries that produce a third of the world's crude, with No. 4 oil producer and OPEC member Iran typically the most vocal.

Meanwhile the world's two largest consumers, the US and China, have both said that they will seek to boost reserve stocks in Q1 of 2009, whilst prices remain relatively low.

The ongoing dispute between Russia & Ukraine over gas supplies is also keeping the energy market nervous.

Today's Company Going Into Administration Is

China and ceramics firm Waterford Wedgwood.

The firm say that they expect to call in the administrators to its UK arm today.

It has also requested that its shares be suspended from trading on the Irish Stock Exchange with immediate effect.

Sadly, this undoubtedly won't be the last big name to buckle under in 2009.

The last of the Woolies stores to close shut their doors for the last time this week.

Marks & Spencer are expected to report its worst Christmas trading in decades later this week, despite holding its first pre-Christmas sale in a generation in November, and discounting heavily in December.

EU Wheat Closing Comments

EU wheat futures closed higher Friday in a very quiet low volume session where many participants aren't back in the marketplace until Monday.

Paris March milling wheat closed up EUR1.25 at EUR138.25/tonne. London May feed wheat closed up GBP1.50 at GBP114.00/tonne, with just 24 lots moved.

London wheat has risen around GBP20/tonne from contract lows set at the beginning of December, the vast majority of that increase being currency-led.

One euro was worth 84 pence at the end of November, by the close of 2009 that had risen to almost 98 pence. Against the dollar meanwhile sterling has fallen from $1.54 to around $1.45 during the same time frame.

I'm still not seeing much evidence that despite this decline, and our theoretical competitiveness on the export arena, is actually being translated into fresh hardcore export business.

CBOT Closing Comments (Jan 2nd)

Corn

Nearby corn futures finished trading higher this session. Due to the New Year's Day holiday, there was no overnight trading. Improved weather conditions in South America are forecasted this week, but not enough to alleviate the recent dryness there. This past Wednesday afternoon, the USDA released their 5-year revisions to US acreage and production. The only revision to note for corn is that 2007 production was lowered by 0.3%. That didn't flow through to smaller ending stocks, however. Earlier this morning the USDA released its weekly export sales for the week ending 12/25/08. US corn shipments were at 602,087 MT while net new export sales were at only 269,867 MT. Higher crude oil and equity markets provided the support to nearby corn futures to finish higher. March corn finished at $4.12 1/4, up 5 1/4 cents. December closed at $4.56 1/4, up 4 3/4.

Soybeans

Soy futures closed lower. There was no overnight trading due to the New Year's Day holiday. Crude oil and the US dollar were both trading higher at the close of grain trading. Rains are expected in most of Brazil this week while Argentina will continue some dry conditions. Last Wednesday's USDA 5-year US acreage and production revision report showed revisions to soybean production for 2005 at 0.2% higher and for 2006 at 0.3% higher. Ending stocks were not affected. This morning?s weekly US exports of soybean complex for the week ending 12/25/08: soybeans - shipments were 920,751 MT and sales were 510,643 MT; soy meal & cake shipments were 37,247 and sales were 43,297; soy oil shipments were 1,866 MT and sales were 6,734 MT correction. Product futures were higher, aided by the firmer energy market. January soybean closed at $9.70, down 2 1/4 cents; January soy meal closed at $301.00, up 50 cents; January soy oil closed at $33.58, up 29 cents

Wheat

March wheat futures in Chicago, Kansas City, and Minneapolis ended higher this session. No forecasted cold weather concerns are threatening US wheat crops, but there is some dryness in the southern plains. That's a typical side effect of the La Nina weather pattern. A firming US Dollar Index limited the gains in wheat futures. A higher trading stock market and crude oil at the time of grain's close added to bullish support. This morning's weekly USDA export sales for 12/25/08 reported wheat sales were 418,142 MT and shipments were 177,091 MT. The 5-year revision to US acreage and production released by the USDA last Wednesday reported lowering wheat production for 2004, 2005, 2006, and 2007 at 0.1%, 0.1%, 0.2%, and 0.8% respectively. March CBOT wheat ended at $6.11, up 1/4 cent; March KCBT wheat ended at $6.33 1/2, up 3 1/2 cents; March MGEX wheat ended at $6.55 1/4, up 1/2 cent.

The New Citroen Burningo

The French government says vandals burned 30 percent more cars on New Year's Eve this year than during the holiday last year.

Burning cars on the last day of the year has become a tradition in rundown French suburbs.

The Interior Ministry said 1,147 cars were burned overnight, compared with 878 last year. It said the police had arrested 288 people during the night, up from 259 last year.

I hate those cheese-eating surrender monkeys. Why do all Frenchmen smell? So blind people can hate them more easily.

Melamine Bhuna Anyone?

Scientists and consumer groups are raising concerns that fish from China might also be contaminated with melamine.

China is the world's largest producer of farm-raised seafood, exporting billions of dollars worth of shrimp, catfish, tilapia, salmon and other fish.

Industry experts say that melamine has been routinely added into fish and animal feed to artificially boost protein readings.

And new research suggests that, unlike in cows and pigs, the edible flesh in fish that have been fed melamine contains residue of the nitrogen-rich substance.

Laboratory studies in the U.S. of melamine-fed catfish, trout, tilapia and salmon by the FDA's Animal Drugs Research Center found that fish tissues had melamine concentrations of up to 200 parts per million.

That's 80 times the maximum "tolerable" amount set by the FDA for safe consumption.

Tilapia is widely used in Chinese and Indian restaurants in the UK.

Brazilian Crop Weather

Brazilian weather watchers report mostly dry conditions across the holiday period except for a few light showers across Rio Grande do Sul. Temperatures ranging 75-94F.

Dry conditions are forecast to continue across much of the country's corn belt, with just a few showers, locally heavier across Parana, with temperatures around normal for the time of year.

The forecast calls for mostly dry conditions Saturday through Tuesday.

The corn harvest is already nearly complete across northeastern Brazil, with quality generally lower on persistent dryness.

Overnight Developments

There is no eCBOT market today, so we will have to wait until 3.30pm to see which way the market is going to go on the first trading day of 2009.

Crude oil is trading however, and after closing 14% higher on New Year's Eve, is around 8% lower on ideas that that particular rally was overdone.

News emerges today that Russian gas supplier Gazprom is to re-open talks with Ukraine over natural gas supplies, after cutting off supplies yesterday morning.

Crude is $3.31 lower at $41.29/barrel.

Whilst there are clear signs that US refineries are cutting back production, falling consumption is still seeing stocks building. OPEC's recently announced cuts will eventually start to filter through into the supply chain come the spring, analysts reckon.

The situation in the Middle East is keeping traders nervous, after Nizar Rayan, a senior Hamas leader, has been killed in an Israeli airstrike on Gaza. Most analysts however seem to think that it is unlikely to have any significant threat to world supplies.

In the grains sector South American weather appears to be the main factor at the moment, with the Argy wheat crop already decimated by drought, concerns are now switching to the possible effect on the Brazilian and Argy corn and soybean crops.

Mortgage approvals in the UK edged lower to 27K in November, the lowest level since 1991, from a revised down of 31K in previous month as falling home values paired with the ongoing turmoil in the credit market curbed demands for home investments.

The pound is up to the dizzy heights of 1.0430 against the euro, although it did get above 10.06 on New year's Eve. Against the dollar we languish around $1.4530 as the greenback is buoyed by falling crude oil.

JD Wetherspoon has cut the price of a pint of beer to less than £1 and lowered the cost of other drinks and meals in a bid to attract customers as the pub industry faces one of its toughest years. The chain will sell pints of Greene King IPA and bottles of San Miguel for 99p.

That's going to encourage even more piss-stained tramps, vagabonds and ne'er-do-wells into the place. I might pop down at lunchtime.

Russia Shuts Off Gas Supplies to Ukraine

Russia has stopped all gas supplies to Ukraine after the collapse of talks to end a row over unpaid bills and prices.

Russia's gas giant Gazprom said it turned off the taps at 0700 GMT, when its contract to supply Ukraine ended.

Ukraine insists it has paid off its debts to Gazprom, but Russia contests this. The two countries have also failed to agree on a price for 2009.

A similar row between Gazprom and Ukraine at the beginning of 2006 led to gas shortages in several EU countries.

Crude Oil Posts Large Gain On Last Day Of 2008

Crude oil futures closed the last day of trading in 2008 posting 14% gains as the bulls emerged from their hideouts. Still, futures are down 54 percent this year, the first annual decline since 2001, and down around 70% from the July all-time high of $147.27/barrel.

Whilst Energy Dept data shows that US gasoline & distillate inventories rose in the week to 26 Dec, the increases were much lower than anticipated.

US refineries operated at 82.5 percent of capacity last week, down 2.2 percentage points from the week before and the lowest since the period ended Oct. 10 when the Gulf Coast was recovering from hurricanes Gustav and Ike.

Gasoline stockpiles increased by 800,000 barrels, less than forecasts for a 1.5-1.7 million barrel build, while distillates rose by 700,000 barrels, below expectations for a 1.1-1.5 million barrel increase.

The news is of particular interest as refiners often shut units for maintenance in late January and February as heating-oil demand falls and before gasoline use rises. Whilst the data does confirm that US consumers are continuing to use less, a heavy shutdown period in the new year could soon turn a surplus into a deficit, analysts said.

A dispute between Russia and Ukraine over gas supplies may see Ukraine forced to turn to Europe for supplies in the new year. Russia's gas export monopoly Gazprom said on Wednesday that talks with Ukraine over gas prices for 2009 have failed, making a cut-off of gas to Ukraine on January1 unavoidable.

Signs that OPEC members are finally biting the bullet and adhering to quota cuts, and the ongoing tensions in the Middle East added to the nervous tone.

To keep prices at the recent recent extreme lows, the world needs to be a quiet place both economically and geopolitically.

CBOT Closing Comments (31st Dec)

Corn

March corn futures closed double-digits higher in today's session. July corn futures also traded higher. These gains in corn were in part due to a late rally in grains and crude oil futures. Crude oil futures during the afternoon trading session soared to over $4 in gains. A large block of market-on-close & end of year orders sent corn futures (which traded lower most of the day), to a sharply higher close. This afternoon the USDA issued a report of its 5-year revisions to US production and ending stocks estimates. As expected the USDA report did not contain any major market-shaking information. One revision to note was a reduction of 36 million bushels of corn to the 2007 production, from 13.073 billion to 13.037 billion. Due to the holidays, US export sales of corn and other grains for last week will not be released until this Friday. March corn closed at $4.07, up 10 3/4 cents; July corn closed at $4.28, up 11 cents.

Soybeans

January soy futures complex ended higher after trading mixed most of today's session. An afternoon rally in crude oil contributed to a bean oil rally and pushed the soy complex further into bull territory. Most of the soybean rally was provided by a large block of market-on-close & end-of-year orders. Scattered showers are forecasted in southern Brazil later this week, but not expected to alleviate current dry conditions there. Dry weather conditions continue in Argentina. This afternoon the 5-year revision report by the USDA did not contain any significant changes to soybean production or ending stocks. January soybean ended at $9.72 1/4, up 26 1/2 cents; January soy meal ended at $300.50, up $2.50; January soy oil at $33.29, up $1.18.

Wheat

March wheat futures in Chicago, Kansas City, and Minneapolis settled higher this trading session. A late, large block of market-on-close & end-of-year orders provided enough bullish support to rally wheat. This afternoon rally erased the lows wheat were trading during most of the morning, to have wheat futures to end in positive territory. Bullish spillover from the equities market also contributed to wheat's rally. Iraq bought wheat from 3 other countries, but not from the higher priced US. CBOT March wheat settled at $6.10 3/4, up 6 cents; KCBT March wheat settled at $6.30, up 8 1/4 cents; MGEX March wheat settled at $6.30, up 8 1/4 cents.

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