Early Call On Chicago

11/01/11 -- The overnights closed mostly firmer with beans and corn generally up around 3-5c and wheat around 5-8c firmer nearby.

Crude oil is a bit firmer and the dollar a tad lower, both of which should help the grains complex.

Brazilian farmers seem to like these soybean prices, they've sold 42% of their 2010/11 crop, well ahead of the 24% sold this time last year, according to Celeres.

China sold only 164 TMT of the 1.77 MMT of corn on offer at today's government sponsored auction. No bids were again received for the soybeans on offer. Wheat will be auctioned tomorrow.

The trade is divided over how much irreparable damage may have already been done in Argentina. Central areas remain largely dry although some beneficial rains have fallen in the south and east over the past few days.

The North China Plain is in the grip of an acute drought too, with 50% of the nation's wheat crop affected.

There are unconfirmed rumours doing the rounds again of Chinese buying interest in corn. The last time these did the circuit they were without foundation.

Tomorrow's eagerly awaited USDA report should provide the direction in which we go for the next few weeks. The trade is expecting an increase in US wheat acres of anywhere from 2 million up to almost 6 million. They are also anticipating reduced US corn yields and production for 2010, combined with a decline in ending stocks for 2010/11. For beans US 2010 yields and production are seen broadly unchanged from last month although carryout is expected down on the back of strong exports.

The USDA will also report on global production, with Argentine corn and soybean output most under the microscope. The precedent for them to react slowly to change whether up or down means that they may err on the side of caution. Last month they pegged corn output at 25 MMT and soybean production at 52 MMT. Revised figures of 23/24 MMT and 50/51 MMT might therefore be more likely than some of the other private estimates doing the rounds.

Almost everybody is universally bullish, which is usually a worrisome sign. Downside risk is very limited, welcome to the new normal, many are now saying.

Haven't we been here before?

Early calls for this afternoon's CBOT session: corn and beans up 3-5c, wheat up 6-8c.