The Early Vibe

03/08/11 -- Blimey, what happened there then some of you may be thinking as you switch your computer screens on this morning. Chicago did a major turnaround late in the session last night to end with corn limit up and wheat 40 cents higher.

That catapulted both through the USD7.00/bushel level to leave front month September corn at USD7.11 1/4 and September CBOT wheat at USD7.18/bushel.

The reason seems to be a now almost universal belief that the USDA are talking out of their backsides (again) as far as US corn potential is concerned this year (again). Perhaps the fact that they attempted the same trick last year only to eventually capitulate is still fresh in trader's minds.

Bear in mind though that they didn't eventually come clean until the October report.

Having just got used to the idea that this year's corn crop was going to yield around the mid-150's we are now looking at the low 150's even though the USDA are still stuck in the high 150's.

There hasn't been a huge amount of follow through this morning it should be noted, with corn currently just 1-2c firmer. Wheat is down around 6-8c and beans 3-4c lower.

Meanwhile NYMEX crude oil closed at it's lowest in more than a month last night and is currently 75c lower again this morning at a fraction over USD93/barrel.

Asian stocks have fallen sharply overnight whilst safe haven gold has reached a record high. Growth in the US, Europe and even China is now at a near standstill. Spending cuts in the US and financial chaos in Europe hardly provide a nice firm springboard for renewed vigour.

All the same global economic concerns that we had yesterday are still here today. We may soon have a few more to add to those with a variety of US employment numbers due out between now and the end of the week.

The global financial markets are standing at the edge of a cliff I feel. If they fall into the abyss it's pretty unlikely that they won't drag the grains down with them regardless of what the corn crop in Illinois is looking like. IMHO.