The Morning Vibe

10/06/11 -- The overnight markets see beans down 8-10c, corn 1-3c lower and wheat down anywhere from 4-11c. Crude oil is down a tad and the dollar is firmer.

Yesterday's excitement took corn close to USD8.00/bushel, and a substantial premium over wheat. US corn is now reportedly USD90/tonne dearer than Australian feed wheat into eastern Asia. Weekly export sales for corn will clearly want monitoring between now and harvest.

The USDA left potential corn yields unchanged from last month at 158.7bu/acre. Despite the current late planting scenario it is still possible that this could improve significantly given a beneficial growing season. The corn yield was above trend and record large in the late-planted year of 2009 (at 164.7bu/acre) when a generally cool, wet summer favoured crop development and grain fill.

The way Mother Nature has been behaving of late must of course put a fairly large question mark over whether she is likely to be so co-operative this year, but it could happen.

It should also not be overlooked that the USDA have 5 billion of the expected 13.2 billion bushel crop going into ethanol production in 2011/12 and that the ethanol blender's tax credit is up for renewal on Dec 31st.

Meanwhile we have the funds buying into corn like it's a licence to print money, and that's pretty much exactly what it has been for them of late. It may take something "off field" to change that sentiment.

In other markets I see that prilled urea FOB the Black Sea is up USD120/tonne since the 1st of April (no, it's not a joke). That's all down to rising energy costs they will no doubt tell us. Except NYMEX crude is down USD7/barrel since then.

Tunisia have bought 25,000 MT of wheat from my old employers Bunge overnight I see. The reported price is USD333/tonne, a substantial discount to the price Algeria recently paid suggesting that they were a bit more flexible on origin. Some of the offers put up apparently included a "get out clause" along the lines of "we'd like to supply Russian/Ukraine wheat but we will provide another origin if they put the blocks back on."

Brussels issued soft wheat export licences for 128,000 MT yesterday, bringing the year to date total to 18.7 MMT, 11% up on last year.

Almost passing us by un-noticed yesterday was the Bank of England holding interest rates at 0.5% for what I read was the 27 month in a row. Has it really been that long? Blimey! The vibe on the streets is that the ECB may start to increase rates in the Eurozone starting next month, which explains the recent euro strength.

China's soybean imports rebounded to over 4.5 MMT in May, according to customs data. Portside stocks are huge my sources tell me as many of these purchases continue to be done to obtain cheap credit via the back door to fund entirely unrelated projects. The Chinese cash market for soybeans remains weak due to this over-supply.

Russian spring grain planting has reached 95% done and the country will produce 85 MMT of grain this season unless adverse weather intervenes, says the Minister of Agriculture.

My chums at the APK-Inform Agency say that Russia will produce a record 7.2 MMT of sunflower seed in 2011.