Nogger's Blog

Overnight Markets

eCBOT is lower across the board as 2008 draws to a close, with corn, soybeans and wheat all heading for their first annual declines for four years.

Despite hitting record highs earlier in the year, corn seems set to close around 14-15% lower than where we left 2007, with soybeans set to post declines of around 22% and wheat, which peaked earlier, down by around a third.

Traders will be looking to square up positions, if they haven't done so already in a shortened session this afternoon ahead of tomorrows holiday. Friday will likely also be a non-event, with the real fun and games starting again on Monday 5th January 2009.

It will be interesting to see which way the market goes next Monday, I think that it's highly likely to do something dramatic. And my money is already on sharply higher.

Dryness in South America is now becoming a very serious problem (see "Is It Already Too Late For Brazil?" and "Argy Wheat Crop 'Dismal'" posted recently on Nogger's Blog).

Wheat stocks have been replenished with a bumper crop in 2008, but boy did they need to be. Projected 2008/09 world ending stocks however are still well below the previous 10-year average of 174.8 million tons.

Reduced plantings and fewer inputs due to price and credit considerations are likely to see lower production in Europe, Russia, China and the US in 2009. That doesn't give us much room for any serious weather problems.

These issues may, and in my opinion should, start to concentrate traders' minds once we are into 2009.

Best wishes for healthy & prosperous New Year.

Nogger

Is It Already Too Late For Brazil?

Parana, Brazil's #2 soybean growing state and Rio Grande do Sul, the country's #3 growing state have received only a quarter of last season's rainfall between Nov 1st and Dec 29th, local weather service Somar reports.

Later planted soybeans may still have time to recover, if rains arrive soon, but for corn the party could already be over, some analysts are saying.

In these areas soybean planting is still being completed, for corn however time is just about up.

Parana's state's agricultural secretariat says that corn production in the region could drop by 15-20% from last season. In neighbouring RGDS agronomists agree with him.

Parana produced 11.8mmt of soybeans in 2007-08, whilst RGDS produced 7.7mmt according to Conab. Parana also produced 9.7mmt of corn in the first harvest in 2007-08, whilst RGDS produced 5.3mmt Conab say.

A double whammy of lack of rain and lack of credit is to blame, they say. Without credit farmers have cut back dramatically on fertiliser inputs and irrigation.

With no rain forecast for RGDS until mid-January the situation could get worse still.

EU Wheat Closing Comments

EU wheat futures closed mostly higher in quiet pre-holiday trade Tuesday. Paris March milling wheat closed EUR0.50 higher at EUR137.50, London May feed wheat finished up GBP3 at GBP115/tonne.

There was nothing much doing in early trade, with many market participants still away on holiday. However, with the pound plumbing to fresh new euro lows as the day wore on UK wheat found some buying interest.

It has to be said that it did look as if today was a kind of odd session, with nearby wheat trading up GBP5.50 at one stage, albeit for one lot. Signs that someone was maybe trying to manipulate the market on a quiet day?

Jan feed wheat closed at GBP108.25, around GBP20/tonne higher on recent contract lows, set only a few weeks ago (see chart below):

CBOT Closing Comments

Corn

March corn futures closed higher in today's session. July corn futures also closed higher on the day. February crude oil futures were down 83 cents per barrel at $39.19 upon the closed of pit trading in the grains. The US dollar index was slightly up during the close of the grain's trading session. Drier weather conditions in Argentina and Brazil are forecasted to continue to inhibit corn crops there. This was supportive to US corn futures, yet outside markets influences were mixed support to corn futures. The USDA is scheduled to release its 5-year adjustments of US and world supply and demand numbers tomorrow afternoon. The USDA Hogs & Pigs report showed smaller than expected market hog numbers, which is not bullish for corn demand. March corn closed at $3.96 3/4 , up 2 3/4 cents; July corn closed at $4.17, up 2 3/4 cents.

Soybeans

January soybean complex settled mixed this trade session. January soybeans and soy meal futures settled higher, while January soy oil futures settled lower. A weakness in the US dollar earlier during grain trading, and continued dry weather conditions forecasted in Argentina and Brazil lent strength to US soybean futures. Higher meal futures also boosted product value for soybeans despite a little drag from the bean oil. Crude oil futures were trading lower than $40 per barrel during grain pit trading and closed lower. That weighed on the bean oil via biodiesel margins. January soybean settled at $9.45 3/4, up 7 1/4 cents; January soy meal settled at $298.00, up 59 cents; January soy oil settled at $32.11, down 10 cents.

Wheat

March wheat futures in Chicago, Kansas City, and Minneapolis finished higher at the close of the trading session. A weakened in the US dollar earlier, a lower crude oil, and gains in the equities markets provided bullish support to wheat and the other grains. Saudi Arabia announced plans to tender for 500,000 tonnes of hard wheat which would be helpful to US wheat exports. Pakistan via the TCP, has issued to purchase 250,000 tonnes of wheat from the US. These potential US wheat export news contributed to wheat's gains today. CBOT March wheat finished at $6.04 3/4, up 12 3/4 cents; KCBT March wheat finished at $6.21 3/4, up 10 3/4 cents; MGEX March wheat finished at $6.55, up 10 cents.

eCBOT Close/Early Call

The overnight eCBOT session closed with gains across the board with soybeans ending around 10c higher, with corn up around 5c and wheat up 2-3c.

Dry weather in Argentina and Brazil was cited as reason behind the recent rally.

Weaker crude pared gains, and year-end book squaring is keeping traders cautious of entering into new longs until next week.

Argentina is the second-largest global corn exporter behind the United States and the world's largest exporter of soymeal and soyoil.

An ongoing drought situation there has already slashed 2008 wheat production from 16mmt last season to an estimated 9-10mmt now. Reports of some truly awful yields suggest that final output there may be even lower, with around 20% of the crop still to harvest.

Traders are fearful now that this situation will spill over into spring-harvested soybeans and corn unless significant rains arrive soon.

In Brazil, some farmers in the top soy state of Mato Grosso have already begun harvesting but in other states the crop has been hindered by dry weather.

Despite the Chinese government being an aggressive buyer of domestic soybeans and corn in an effort to support the rural economy there, they may soon re-open the export door, some analysts say.

Beijing will allow the export of 500,000 tonnes of corn, 500,000 tonnes of wheat and a small amount of rice, early in 2009 they said.

This would certainly seem likely to cap any significant price rallies for the time being, at least until any crop losses in South America could be quantified more accurately.

Early calls for this afternoon's last full CBOT session of 2008: Corn futures are expected to open 4 to 6 higher; soybeans 9 to 12 higher; wheat 2 to 4 higher.

Cargill Donate USD5 Million To World Hunger

Cargill Inc., are to donate $5 million to world hunger it was announced Monday.

The agricultural giant generously said that it will make following donations:

1) $500,000 to the Salvation Army
2) $500,000 to Harvest heartland
3) $ 1 million to Feeding America
4) $2 million to be distributed through the companies own people and offices
5) $1 million to Global Food-banking.

A Cargill spokesman denied that there was any truth in the rumour that now that Robbie Mullen is on a strict diet, they've more than covered that amount of money already on his expenses at the local pub.

UK Crops Well Behind Last Year

ADAS is reporting that UK winter grains and oilseeds are generally well behind last season in terms of development.

A combination of late drilling, cloddy soils and colder temperatures, particularly in the north and the west, means that the chances of hitting last season's production levels have been dealt an early blow.

Around 10% of planned winter wheat acreage hasn't even made it into the ground, they say. This coincides with a recenr Farming Online survey.

Only about 20% of wheat crop has started tillering, well behind 50% at the same time last year.

Some planned winter barley acreage also won't make it, and is now likely to be sown in the spring, they say. Around 40% of what has been sown is tillering, just half of the 80% that was tillering twelve months ago.

Winter oats are estimated at 20% tillering, compared to 60% a year ago.

Winter oilseed rape development is very varied, they say, with some crops very small in areas where drilling was delayed or soil conditions poor.

Winter beans have also got off to a poor start, with fewer acres planted than had been anticipated, again largely due to wet conditions.

Throw reduced fertiliser inputs into the equation, due to cost & financial considerations, and we could be looking at significantly lower output in 2009, particularly if Mother Nature doesn't co-operate.

Bakery Services PLC Shares Suspended

Shares of Bakery Services on London's AIM were suspended at 0.025p Wednesday pending the following announcement:

"Pursuant to Rule 15 of the AIM Rules for Companies the Company's shares have been suspended from trading on AIM with immediate effect, as the Company was unable to implement its investing strategy by 28 December 2008, being the anniversary of the Extraordinary General Meeting at which shareholders gave their consent to the disposal of the Company's operating subsidiaries.

"The directors continue to pursue acquisition opportunities for the Company and will make further announcements when appropriate.

"In particular preliminary discussions are ongoing with one party and the directors are actively considering seeking an admission of the Company's ordinary shares to PLUS, an alternative market to AIM which can provide a suitable trading facility for shareholders and lower listing costs for the Company.

"In the event that the Company does not undertake an acquisition that constitutes a reverse takeover pursuant to Rule 14 of the AIM Rules for Companies the admission of the Company's ordinary shares to AIM will be cancelled on 29 June 2009."

Pound Slumps To Near 7-Year Low Vs Dollar

The pound slumped to a six and a half year low of $1.4396 against the dollar Tuesday, and was close to Monday's all-time low against the euro, as speculators picked the UK currency off as easy prey.

In subdued holiday trade dealers are looking for some easy money, and sterling fits the bill perfectly.

The pound has been battered by a plethora of awful economic news over recent weeks and now finds itself near parity with the euro, and it's lowest against the dollar since April 2002.

One-for-one with the euro seems to be on the cards, it's just a matter of when, possibly in even thinner trade tomorrow? The interesting thing will be to see how sterling fares in the new year once normal trading resumes. Will it bounce back from parity, much as we have seen when the dollar briefly breached the $2 mark against the pound a couple of times in the last few years?

Some seem to think so: Pound Poised to Gain as BOE Slows Pace of Rate Cuts

Overnight Developments

eCBOT grains are a tad higher this morning in see-saw trade. At 9.15am GMT soybeans were around 5c higher, with corn and wheat up 2-3 cents.

Grains failed to hold onto yesterdays gains last night as month, quarter and year-end profit-taking kicked in after two or three sessions of strong gains.

The market seems however underpinned for the time being by dryness in South America (see here for some truly shocking Argy wheat yield statistics), strong Chinese buying and a weaker dollar (although not so much against an equally weak sterling).

Crude oil is half a dollar lower at $39.50/barrel. Crude prices rose above $40 a barrel yesterday as Israel and Palestinian militants exchanged rocket fire and the death toll mounted.

Crude is set for it's first annual decline for seven years in 2008.

Although US stockpiles are rising, this is partly due to the holiday season and also the contango situation that exists in the market, where the large premium between nearby months and forwards pays the oil giants to store oil.

OPEC's cuts, if carried through, may well start to squeeze supplies as we get into the new year, ultimately supporting the markets by the spring.

The pound is currently trading at 1.0239 against the euro, close to yesterday's all-time low of 1.0210. that makes one euro worth 97.74 pence, just under yesterdays low of 98 pence.

The dollar is down the most in a fortnight against the euro, at 1.4187 from 1.3927, on concerns that the problems in the Middle East will lead to disruptions in crude oil supplies. It seems pretty unlikely to me that this will, in reality, be the case. The eurozone does, however, offer a substantially better interest rate than the US at the moment, if you can call 2.75% attractive.

Russia Exported Over 1MMT Wheat 1-24 Dec

During the period December, 1-24, 2008, grain exports from Russia totaled 1.36 mln tonnes, including 1.05 mln tonnes of wheat, 308,000 tonnes of barley and 2,000 tonnes of rye, according to the Russian Ministry of Agriculture.

The Best Performing Commodity Of 2008

Cocoa. Can only continue go one way apparently. Sell the arse off it, I say.

Is The High Street Closing Down?

Three more retailers have fallen into administration, setting the tone for a likely string of further collapses in the new year.

USC, a 58-store branded fashion chain backed by the business tycoon Sir Tom Hunter, appointed administrators yesterday afternoon, according to media reports.

In addition, Passion for Perfume, a 45-store fragrance chain, confirmed that it too has called in the administrators over the past week.

Meanwhile, Olan Mills (no he's not the new Man City right back), a photography studio which lists 34 studio locations across England and Wales, many of them within baby goods retailer Mothercare stores, said in a statement on its website that it stopped trading on Boxing Day and was appointing an administrator.

These latest collapses add to a growing list of firms for whom the writing was on the wall for the new year. With quarterly rents due and sales slumping, there will I fear be many more to follow in the Jan/Apr period.

Whittard of Chelsea, The Officers Club, Zavvi, and children's wear outfit Adams have all gone, or in the later case seem, about to go the same way over the last ten days or so.

Argy Wheat Crop 'Dismal'

Well, I guess we've been well overdue for a crop disaster somewhere, and it looks like Argentina is the first name out of the hat for some time.

The one thing the drought has down down there is advance the harvest to around 87% complete as of Christmas Day, according to the Argy Ag Secretariat. That's up 17 points from the harvest pace of a year ago.

One report circulating on the Dow Jones wires says that in southern Buenos Aires province, near Bahia Blanca, yields are averaging just 0.65mt/ha.

Let me read you that again. Averaging, not reported as low as in the worst farm in the province, AVERAGING 0.65mt/ha. It's one of those figures that is so low you wonder if it's a typo.

"Dismal" is how the Ag Secretariat describe it, and they certainly aren't wrong there considering that in decent parts of Europe we can average 7-8mt/ha.

Their official production estimate of just 9mmt vs 16mmt last season may be in jeopardy if yields like that are correct.

Ch, Ch, Ch, Ch, Ch, Changes

Nogger has been working very hard across the festive period, whilst the rest of you have been stuffing your faces with rubbish, to bring some life-enhancing changes to your blogging experience.

As these are gradually being implemented over the next week or so, please bear with me. I will endeavour to make the transition as painless as possible.

These will include futures prices updated throughout the day for all the European & US grains markets (including the overnight eCBOT), I may even throw in Aussie wheat & crude oil just because I can.

I just need to find an aesthetically pleasing way of making it all look not too overpowering.

Meanwhile if you'd like such things on your existing website, or even a new one designing from scratch, drop me an email: Nogger

Check out the Gemcom website for an example of the sort of thing Nogger could do for you.

EU Wheat Futures Sharply Higher

EU wheat futures closed sharply higher Monday, supported by firmer US markets over the holiday period and steadier crude oil.

UK wheat was also helped by another day of record lows against the euro for sterling.

March Paris milling wheat ended up EUR5.50 at EUR137.00/tonne. London November feed wheat closed up GBP5 at GBP122.50/tonne.

Trade was generally quiet, with many participants either content to sit on the sidelines until the new year, or still away on holiday.

In such a low volume session it seems likely that the upside on London wheat was overdone & exaggerated.

The pound continues to drift ever closer to parity with the euro, today hitting an all-time low of 1.0210. This should provide underlying support for wheat. However, export homes still need to be found in the new year if we are going to make serious inroads into our exportable surplus.

CBOT Closing Comments

Corn

March corn futures ended lower than their opening in Monday's trading session. This is in contrast to corn futures trading last Friday and the overnight session to a new high since the beginning of this past November. Recent Israeli-Palestinian conflicts sent crude oil futures higher prior to the grain markets opening and the US dollar index weakening, but corn futures haven' responded positively to these influences. Favourable weather this week in the central US will be conducive to corn cash selling. Non conducive weather in Brazil and Argentina is expected this week, inhibiting favourable crop growth. These factors on top of a down day in the stock market weren't enough for corn futures to end the day higher. March corn finished at $3.93 1/2, down 18 3/4 cents; July corn finished at $4.14 1/4, down 18 1/4 cents

Soybeans

January soybean, meal, oil futures settled lower in Monday's session. Soybean complex futures rallied this past Friday and during this past overnight session, but couldn't continue this upon trade opening this morning. Rising crude oil future values, declining US dollar index, and strong export demand from China were providing the positive influence to soybean complex futures but wasn't enough to let soybean complex end in the positive. As mentioned above, weather conditions in the US and South America will be friendly for US soybeans and not for their South American counterparts. January soybean closed at $9.38 1/2 , down 13 1/4 cents; January soy meal closed at $292.10, down $5.60; January soy oil closed at $32.21, down 61 cents.

Wheat

Chicago, Kansas City and Minneapolis wheat futures closed trading lower in today's session. A down day in the stock market, and spillover bearish activity from soybeans and corn affected wheat futures. Threats of winterkill in the US midsection have dissipated due to milder weather conditions early in the week while colder weather expected later but not enough to foster winterkill. A weakening dollar should be bullish support for wheat in the form of favourable US export prices, but trading didn't reflect this. CBOT March wheat settled at $5.92, down 7 1/4 cents; KCBT March wheat settled at $6.11, down 5 1/4 cents; MGEX March wheat settled at $6.44 1/2, down 8 1/2 cents.

Ten On Trial In Chinese Melamine Scandal

Ten people have been put on trial across the weekend in the Chinese northern province of Hebei, accused of producing, selling or adding protein powder that contained melamine to raw milk.

Six went on trial Friday, with another four Monday in Shijiazhuang, capital of Hebei and headquarters of the Sanlu Group, the company at the heart of the scandal, Xinhua news agency said.

Sanlu was closed in September and went into bankruptcy last week.

Tian Wenhua, the former board chairwoman and general manager of Sanlu, goes on trial on Wednesday, according to media reports.

Australian Wheat Leaps Monday

Australian wheat futures jumped A$14-18 Monday, following three consecutively higher days in Chicago.

Harvest pressure has eased in the east, with things pretty much wrapped up in NSW and Queensland, reports suggest.

In Western Australia however, the nation's largest producer and exporter, the harvest continues to lag, and is only around half done in the south of the state.

Overnight Markets Extend Rally

The overnight eCBOT market has extended the recent rally in the grains pit with the complex higher across the board Monday morning.

Corn is up for the fifth straight session, marking its highest levels in eight weeks, and now sits comfortably above $4/bushel.

Israeli air strikes in the Gaza strip increased Middle East tensions over the weekend, sending crude oil higher.

Weakness in the dollar against the euro is also adding support to the grains complex.

A dry Christmas period in South America is also seen as bullish for corn and soybeans, as is continued domestic stock-piling by China.

At 8.30am GMT corn and wheat were around 7-8c firmer, with soybeans around 22-23c higher.

This gives beans a combined gain of around 74-75 cents over Christmas Eve/Boxing Day and this morning. Corn has added around 25 cents and wheat around 32 cents in the same period.

Crude oil is almost $2, or 5%, firmer this morning at $39.56/barrel.

The dollar is broadly weaker, although not significantly so against the pound which is also on it's arse, as crude rises in response to the Israeli's Christmas present for the Gaza Strip.

At 8.45am GMT the dollar was 1.4237 against the euro, from 1.4028 late in New York on Boxing Day. Against a similarly blighted pound the dollar was $1.4690. The greenback also slid on speculation that US housing and manufacturing reports due this week will show the economy is continuing to deteriorate.

The pound is down again against the euro, falling to 1.0297, guess what folks, that's another all-time low and one step closer to parity. One euro is now worth more than 97 pence.

The Chartered Institute of Personnel and Development says that that while total UK unemployment will not hit three million next year, the time between New Year and Easter will be the worst for job losses since 1991.

The news comes as a host of major High Street names have, or are about to, close their doors. It seems that this could just be the tip of the iceberg, with many store having slashed goods by up to 70% before Christmas, where is the money going to come from to pay the bills during the lean Jan/Mar period?

With children's clothing chain Adams said to be on the brink of administration, following the collapse of Woolies, Zavvi, Whittard. Officers Club, MFI et al who is next?

According to the Times at the weekend Focus DIY, Jessops, Clinton Cards and Land of Leather are amongst the favourites.

An Icelandic government fire sale may see the likes of House of Fraser, Hamleys and Karen Millen sold of on the cheap, reports suggest.

The High Street could look very different this time next year.

What Have You Missed Over Christmas?

Quite a lot actually. Dry areas in Brazil and Argentina didn't get the rains that were in the forecast Christmas Eve through to Boxing Day, leading to some quite sharp gains in Chicago.

There is also some speculation that the funds might be about to jump back into the grains market in the new year. With interest rates close to zero, crude oil on the floor and stocks looking decidedly shaky maybe the ags offer the best of a bad bunch at the moment?

Golden Sacks and Barclays Capital are both reportedly recommending gold, agriculture and livestock as the markets to be into in 2009. Ag futures are the best “defensive” bet among commodities, say Golden Sacks, citing global population growth. For once a not entirely implausible argument, and one endorsed by Nogger Securities Inc.

London wheat also closed with some fairly impressive gains Christmas Eve as the pound continues it's decline against the euro. With some lower predictions now filtering through for the global 2009/10 crop, Nov09 onwards gained GBP2 to GBP2.50/tonne.

Unlike our own, the US markets were also open on Boxing Day.

For the record, here's a list of front-month closes that you may have missed:

Market            Xmas Eve      Boxing Day
CBOT Soybeans     +14 3/4          +36
CBOT Soymeal      +6.50            +9.80
CBOT Soyoil       +10              +151
CBOT Corn         +3 1/4           +14 1/4
CBOT Wheat        +7               +17
LIFFE Feed Wheat  +1.60            N/a
Paris Milling Wht -0.25            N/a
Paris Corn        +1.50            N/a
Paris Rapeseed    +0.25            N/a

CBOT Closing Comments (Boxing Day)

Corn

March corn futures traded and closed above $4 a bushel during afternoon trading. The US dollar traded and closed lower than its open value. Crude oil futures gained strength closing up $2.36 per barrel, providing support to corn futures. Spillover bullish trading from soybeans contributed to corn futures' rally to a new 7-week intraday high. USDA released their weekly export sales for the week ending 12/18/08. US corn exports shipped were up about 17% for the previous week at 831,287MT. China announced it is to buy 4.5 million of corn for its reserve by April 2009. March corn ended at $4.12 1/4 , up 14 1/4 cents

Soybeans

Soybean rallied and closed higher in part to news of unfavourable weather conditions for South American crops. A weakened US dollar and higher crude oil contributed to soybean complex futures to be bullish. USDA this morning reported that US soy meal and cake export sales for the week ending 12/18/08 were up 230% at 145,700 MT. January soybeans closed at $9.51 3/4 , up 36 cents; January soy meal closed at $297.70, up $9.80; January soy oil closed at $32.82, up $1.51.

Wheat

Wheat futures during the intraday trading went above $6 for the first time since mid October, but only CBOT wheat closed below $6. This seven week high was in part brought on by spillover rallies in soybeans and corn. Renewed weather concerns affecting current US planted crops also contributed to wheat's rally. March CBOT wheat finished at $5.99 1/4 , up 17 cents; March KCBT wheat finished at $6.16 1/4 , up 16 1/4 cents; March MGEX wheat finished at $6.53, up 11 1/4 cents.

Chinese Dairy Co Bankrupt In Wake Of Melamine Scandal

Sanlu Group, one of the companies involved in the recent Chinese melamine in infant formula crisis, was declared bankrupt on Christmas Eve.

A court-appointed receiver will take over management of the company and has six months to sell its assets and pay creditors.

The major shareholder in the company is said to be New Zealand dairy giant Fonterra.

“We have been aware of this commercial reality and that was the reason we elected to write down the full value of our investment in Sanlu," Fonterra CEO Andrew Ferrier was quoted as saying.

Egypt Buys Russian Wheat In Tender

Egypt's state-owned wheat buyer GASC has said it has bought 100,000mt Russian wheat in a tender at $173 FOB, plus $8.50 freight.

The winning tender was from Abu Dongol, and beat the cheapest French wheat offer by $12/tonne.

It is interesting to note how close the freight spread was between all the different origins offered, reflecting the current state of the freight market.

US wheat was offered with shipping as low as $11/tonne, with French freight offered at $8.50/tonne and shipment from Germany offered at $9/tonne.

Argentina Announces Some Export Tax Cuts

Newspaper reports that President Cristina Fernandez's Argy government would announce tax cuts on soybeans appear unfounded as the government there said Monday it would cut taxes on fruit and vegetables, but not soya.

The government also slightly increased earlier tax cuts on sorn and wheat exports for small to medium-sized farmers.

Argy farmers are expected to harvest a record 50.5mmt soybeans in 2008/09, so it's no great surprise that the government are leaving taxes on beans where they are.

This may have a negative impact on plantings for 2009/10, but it's too early to tell, the goalposts could be moved several times yet between now & then.



An Argy Government Spokesman Eying The Goalposts Yesterday

eCBOT Close/Early Call

eCBOT grains closed mixed Tuesday with corn and soybeans around 2 cents firmer and wheat 6-8 cents lower.

Wheat was lower as news began to emerge that a Pakistan tender for 500,000mt wheat due for completion yesterday had been filled by mainly Russian grain.

Although exact details aren't yet available, Pakistan's state trading agency TCP said it had purchased at least 490,000 tonnes of wheat with the origin believed to be Black Sea region, largely Russia.

US wheat exports continue to lag, with the USDA last night reporting export inspections of 9.79m bushels, compared to trade estimates of 12-15m.

Iraq, once a nailed-on US export home, bought 300,000mt wheat in a tender Friday, none of it US. They bought 100,000mt each Canadian, Australian & Romanian wheat at prices ranging from $193.50 to $219 FOB.

Crude oil is showing little change around $40/barrel. Japan is closed for the Emperor's birthday holiday. I wonder if anyone has bought him any new clothes? Woolies have got some special offers on I hear.

A quiet pre-Christmas session is expected today, with early calls: Corn futures are expected to open 1 to 2 higher; soybeans 2 to 3 higher; and wheat 4 to 6 lower.

Madoff Scam Latest

Anyone who withdrew money from their "investment" in the now disgraced Bernie Madoff Securities scam at any time during the last six years may have to pay it all back, Bloomberg are reporting.

Complex US bankruptcy laws authorise trustees to reclaim monies paid out from such a scheme to "spread the burden" across all the scheme's investors.

And New York state law allows them to go back up to six years to do it, apparently.

This means that anyone who withdrew funds at any time during this period would have to prove that they did so in "good faith" and without any knowledge of suspicion or fraud.

Looks like the only people that are going to get fat out of this one are the lawyers.

Simon In Resignation Shocker

Blackpool FC boss Simon Grayson has handed in his resignation to take the vacant Leeds Utd managers job.

Grayson was confirmed as the new boss at Elland Road at lunchtime today. Grayson takes over from Gary McAllister, who was sacked on Sunday by the League One club following five straight defeats.

Blackpool aren't happy and have said they will consider suing. Leeds said they they aren't bothered.

What were you expecting?

The Grain In Spain Is Mainly Grown In Vain

Spanish grain farmers are expected to produce significantly less in 2009, according to Donaciano Dujo, head of the ASAJA farm union in Spain's grainbelt region of Castilla-Leon.

With current prices lower than production costs, farmers are expected to reduce plantings sharply next season.

Dujo estimates that the costs involved in producing a 3.1mt/ha yielding crop are around 600 euros, with 3.1mt of wheat currently worth only 420 euros on the domestic market the problem is there for all to see.

The Castilla-Leon region produces around half of Spain's national output of wheat, accounting for 6.7mmt in 2007/08.

Dujo estimates that plantings this season will be down around 25% to 1.5m hectares.

Farmers said land not sown to grain would either be left fallow or planted with lower-maintenance crops like rape, sunflowers, field peas or vetches.

Due to it's unpredictable climate grain production in Spain varies quite wildly, yielding anything from 14-24mmt in recent years. Even with a bumper crop in 2007/08 the country still needed to import 12mmt of grain.

Next Up For A Bailout

The US government have set a dangerous precedent by crossing the line between "the financial sector" and every man & his dog. By providing the US auto industry with a financial bailout it is only a matter of time before another sector of industry arrives in Washington with their cap out.

Who will it be?

The smart money is on the construction industry.

With credit virtually dried up, 2009 could see a massive wave of defaults and bankruptcies on shopping malls, hotels, office buildings and other commercial property, analysts are warning.

Some $350 billion of US commercial mortgages will be due for refinancing over the next three years experts say. With little or no credit available, and market valuations through the floor, a lot of lenders can be expecting the keys through the door.

With millions employed directly or indirectly in the US construction industry, who's to say that this is a less deserving case than the car-makers?

Ukraine: Output In Agriculture To Decrease By One Third In 2009

As a result of the the financial crisis, in the next year Ukraine should expect for a fall of total output in the agricultural sector by 30%, declares Leonid Kosachenko, the president of Ukrainian agrarian confederation.

In addition nearly 15% of people working in the industry will leave the business in 2009, he forecast.

According to him, grain producers plan to decrease spring sowing area by one third.

Overnight Developments

Crude oil is lower, with the front-month Feb future down around half a dollar to $39.45/barrel. As with the Jan future the spread between front-month & the deferreds is already starting to widen, with around $3 between Feb & March, and almost $15 between Feb09 and Feb10. This will only serve to encourage stockpiling.

The January future, which expired last week, plunged 6.5 percent to $33.87 a barrel on Dec. 19, the lowest settlement for a contract closest to expiration since Feb. 10, 2004.

Demand from Japan and South Korea is falling according to import data. China's central bank cut interest rates for the fifth time in the last three months yesterday in an effort to stimulate the economy.

eCBOT grains are mixed, mostly lower in sympathy with falling crude & stocks. Beans currently 2-3c easier, wheat down around 6c and corn up 1.

The harvest in Western Australia is around 75% complete according to Cooperative Bulk Handling Ltd. Although the harvest in the north of the state is pretty much done, there's still plenty of wheat left to cut in the more temperate south, where the harvest is well behind schedule, and will likely run into mid-January.

There are no such problems in Argentina, where dry weather and temperatures into the 90's see the harvest pace well ahead of normal. Yields however are significantly down with a crop of 9-10mmt expected, compared to 16mmt last year.

With the markets winding down for the holiday season volume is low, this could however lead to some volatile price movements in thin trade.

Even the forex traders seem to have quietened down, with sterling showing little change for once at 94.11 pence against the euro and $1.4848 against the dollar.

Going Into Administration This Week Is

Whittards, the High Street tea and coffee retailer, according to the Telegraph. Although not officially in administration yet Ernst & Young have already been lined up for the job apparently.

Ernst & Young, the new Sam Alladyce.

The news follows a disastrous day on the stock market for retailers yesterday, with Home Retail, the Argos owner, Debenhams and Comet-owner Kesa all taking a battering.

Whittards employees are now the hot favourites to follow their counterparts at Woolies and MFI down to the dole office.

PricewaterhouseCoopers figures suggest that 82% of retailers are discounting their merchandise this weekend. This comes at a time when the High Street retailers are normally generating enough profits to see them through the rest of the winter months.

There could be more household names with their heads on the block in the new year methinks.

Incidentally, I went late night shopping in Harrogate last Thursday, and was shocked at how quiet the town was. I swear there were more staff than customers in most of the shops. Even M&S. Some of the more specialist shops had nobody in them at all apart from the staff. When you walked past one, the staff looked up eagerly to see if you'd come in, a pathetic pleading look in their eyes. Only to realise that, just like everybody else, you weren't coming in at all. Merely dodging the carol-singing nutter with the Big Issue. It was like walking round the RSPCA Dog Rescue Centre. Or the little match girl in reverse.

Harrogate town centre, the new three-legged greyhound that nobody wants.

CBOT Closing Comments

Corn

Corn futures closed one cent higher at the end of the trading session. This is after corn futures trading a little above its Friday's close in the overnight session and traded lower through out the midday session. Weekly export inspections were 31.088 million bushels, almost 20 million bushels below year ago for the same week. This was another trading day where the US dollar and crude oil both worked lower, allowing corn futures to end slightly higher. CBOT March Corn closed at $3.81 3/4 , up 1 cent.

Soybeans

The January soy complex components all ended higher today. At the tail end of the midday session the US dollar index started to retreat into negative territory, providing an afternoon of bullish trading activity of soy. Some fund buying also appeared to come in near the close, but overall volume was light. Soybean export inspections YTD are 460.305 million bushels, up 45.466 million bushels from year ago. The Argentine Government officially left unchanged the export tax on soybeans during its morning release. There had been a rumour that they were going to lower it in order to facilitate more exports. January Soybean at $8.86 1/2, up 18 1/4 cents; Jan Soy meal at $275.50, up $8.00; Jan Soy oil at $30.94, up 34 points.

Wheat

CBOT Wheat futures finished higher at the end of the trading session. Today was the first day of electronic only trading of wheat contracts at the Minneapolis Grain Exchange and MGEX wheat futures. Weekly export inspections were only 9.8 million bushels. All three wheat contracts ended positive brought on by a falling dollar in the afternoon session. CBOT March Wheat at $5.69, up 5 3/4cents; KCBT March Wheat at $5.89 1/4 , up 6 1/4 cents; MGEX March Wheat at $6.34, up 8 cents.

Cold Turkey?

Turkey curry, turkey sandwiches or turkey curry? Are you wondering what to do with your leftover turkey this Christmas? The Food Standards Agency has launched a new 'viral' marketing campaign, which raises awareness to the dangers of eating week-old turkey and gives tips to protect people in the UK from festive food poisoning.

‘We all hate to waste food, but by eating week-old turkey from the fridge, you could be asking for trouble.’

A survey carried out by the Agency has shown that one in five of us will risk food poisoning this year by eating old turkey leftovers this Christmas, and some will still be tucking into the turkey sandwiches as the New Year rolls in.

The new 60-second video aims to raise awareness of bad food hygiene and give some key advice on the safe handling of Christmas leftovers. The shocking but amusing film features a family that hasn’t been following the Agency’s advice on food hygiene. Diarrhoea might be the Christmas gift that keeps on giving, but do you really want to give it to your family?

Judith Hilton, Head of Microbiological Safety, Food Standards Agency, said: 'We all hate to waste food, but by eating week-old turkey from the fridge, you could be asking for trouble. For the very young, elderly or those with serious illness, it could be fatal. There are better ways of eating and storing leftover turkey, which won't expose you to festive food poisoning.'

The Agency advises leftovers should be:

• cooled as quickly as possible (within one to two hours) and kept in the fridge
  
• reheated only once, until piping hot
  
• eaten within two days

Overnight Grains

Soybean futures are higher on the eCBOT overnight session, following a sharply higher close on the Chinese Dalian market Monday.

China was higher as the government continues it's program to bolster domestic grain prices by buying heavily on the domestic market. This in turn may lead to improved demand for US soybeans as Chinese crushers and feed mills turn to the US for cheaper supplies.

A steadier tone to the crude oil market, after the January contract took a pasting late last week as long holders got squeezed ahead of Friday's expiry date, is lending some support.

So too is the US automakers bailout and pre-holiday short-covering.

By 10.30GMT soybeans were around 15c higher, with corn up 2-4c and wheat flat.

Sterling On The Ropes

It's pretty much a case of start as you mean to go on this mornning with the pound heading ever closer to parity agaist the euro and falling to a record trade-weighted low against a basket of currencies.

Comments in the papers over the weekend from Bank Monetary Policy Committee member Tim Besley and Deputy Bank Governor John Gieve, pointing out what we already knew, that there was no quick fix solution to the credit crisis added to the bearish tone. The Bank of England has relied too much on interest rates to control the economy, according to Gieve.

The pound fell to 1.0538 agaisnt the euro and $1.4750 against the dollar.

One euro is currenty worth 94.90 pence, edging closer to the record high of 95.56 pence hit on Thursday.

The pound is down around 22% on the year against the euro and 25% lower against the dollar.

Madoff Scam Ripped Off Charities As Well As Rich And Famous

It is emerging that the victims of the alleged Bernie Madoff scam were all encompassing, with several prominent charities amongst those affected.

The Picower Foundation, established in 1989 by Barbara Picower and her husband, Jeffry Picower, that has given millions to promote biomedical research and human rights says it will close with immediate effect. Adding that this "act of fraud has had a devastating impact on tens and thousands of lives."

The Elie Wiesel Foundation for Humanity, that help Ethiopian Jews and Darfuri refugees, now admits that it invested $15.2 million with Mr Madoff that represented “substantially all of the foundation's assets”.

These stories dwarf the misery of the corporate fat cats such as HSBC and the Royal Bank of Scotland, Man Group, one of the biggest hedge funds in the City, and Nicola Horlick's Bramdean Alternatives. Other high profile victims include Hollywood titans Steven Spielberg and Jeffrey Katzenberg.

Fertiliser Prices Tumbling

Ammonia has dropped to a 23-month low as U.S. demand has dried up and fertilizer producers have announced plant shutdowns over winter. Export sales also are off due to the impact of tight credit conditions on international sales. Terminals are reported to be full from reduced fertilizer applications this past autumn due to uncertainty about prices for both nutrients and crops. The ammonia spot market is $260/ton this month but demand is so slack and the sentiment is so bearish that buyers are uncertain whether the floor has been reached. There are reports of offers at $125/ton for first quarter deliveries, a low not seen since 2002, but no sales have been made.

A report by the ICISPricing.com subscription news service says market indicators point to a strong spring application of fertilizer that will absorb current ammonia stocks. And, in a recent presentation to analysts, Terra Industries vice president Joe Ewing pointed to a U.S. Department of Agriculture report projecting a significant increase in demand for corn, for ethanol in the United States during 2009. “Most recent estimate is an increase of roughly 1/3 over 2008,” said Ewing. “All this tells us that increased corn plantings will be needed next spring to prevent a further decline in already tight corn inventories. Projections indicate plantings will need to be at least in the area of 90 million acres.”

Are you familiar with the expression "talking your own book" Mr Ewing? Informa say that 2009 corn acres will only be a little over 82 million. If the price of corn and the cost of inputs doesn't justify it then you won't get your 90 million acres. Once again, the cure for high prices IS high prices.

So for now, the agricultural fertilizer market has gone into hibernation. From the U.S. Gulf to the Midwest, distribution and storage systems are backlogged. So, Terra Industries stopped production at its 500,000 ton/year ammonia plant at Donaldsonville, La., for six weeks of repairs. Agrium has shut production at its Fort Saskatchewan, Alberta, nitrogen unit. The plant includes a 465,000 metric ton/year ammonia unit and 430,000 tonne/year urea unit. This followed the closure of Agrium's 280,000 metric ton/year Redwater I unit in Alberta in November. Agrium also said it would reduce operating rates at other plants, but did not give details. PotashCorp.'s 1,500 metric ton/day O1 ammonia-making facility on Trinidad has been down for at least a month for maintenance and is reducing urea production as well.

Crude Oil Market Is Not All It Seems

Anyone watching the news Friday night, or picking up a newspaper Saturday may well have heard that crude oil was down below $35/barrel. Well it kind of was & then again it wasn't.

The January crude future was expiring Friday, leaving the board at $33.87/barrel.

Effectively what happened was that long-holders got squeezed out on the last day, unable to take delivery due to storage problems at Cushing, Oklahoma - the delivery point for West Texas Intermediate Crude. In contrast the February contract closed at $42.34/barrel.

With forward prices significantly higher than spot levels, storing oil is a no-brainer. If you have the money & the space that is.

Buy crude on Friday at $35/barrel, sell Jan '10 at $55/barrel, $20/barrel less storage and financing (each said to be around 35c/month). Robert is indeed your uncle, and Fanny your very favourite aunt. It's got to be good to be in the oil storage business at the moment.

It's no wonder that storage levels at tank farms in Cushing are approaching their all-time record level of 28 million barrels, with levels up by 4.7 million barrels this past week alone. And also no wonder total US crude supplies are running at such high levels. Cushing isn't the only storage facility overflowing with oil.

With freight rates through the floor, and commercial storage so tight, dozens of supertankers, full of crude oil, are going nowhere anchored in the Gulf of Mexico, the Far East and even off the coast of the UK.

Royal Dutch Shell Plc sees so much potential in the strategy that it anchored a supertanker holding as much as $80 million of oil off the UK to take advantage of higher prices for future delivery, according to Bloomberg.

It's a situation, traders say, reminiscent of the last time crude prices set a major bottom at around $10/barrel in the late 90's.

EU Wheat Comments

EU wheat futures closed a quiet session mixed Friday with conflicting influences pulling the market in either direction.

A sharply firmer dollar was friendly to prices, but crude fell to a four and a half year low adding a bearish tone.

It is worth noting that January crude was expiring Friday, leaving the board at $33.87/barrel as long-holders got squeezed out on the last day, unable to take delivery due to storage problems Cushing, Oklahoma - the delivery point for West Texas Intermediate Crude. In contrast the February contract closed at $42.34/barrel.

Paris March milling wheat closed up EUR1.25 at EUR130.75/tonne, London May feed wheat ended down GBP0.15 at GBP104.35/tonne.

It was a low volume session as traders begin to pack up ahead of the Christmas holiday season.

It's been a very volatile week on the currency front and that has dominated everything. Sterling fell from a high of $1.5615 early Thursday to a low of $1.4815 Friday, an eight cent move in one day!

The pound setting fresh all-time lows against the euro every day last week except for Friday supported London wheat throughout the week.

EU export business has slowed however, much of what has been shipped since new crop being old sales that were already on the books. Fresh orders are needed to shift the bulk of our surplus in 2009.

As ever, competition from Russia and Ukraine is fierce.

Looking further ahead, Strategie Grains reported this week that European Union grain production in 2009-10 will come in at 292 million metric tonnes, down 6% on the year.

With lower wheat plantings also expected in the US, China, Russia and Ukraine this will not leave a lot of room for a crop disaster somewhere in one of world's leading producers next season.

CBOT Closing Comments

Corn

Nearby corn futures finished down, after weakness was extended from the overnight session. Selling pressure from a rallying dollar provided the price disadvantage to US corn in the global marketplace. A last minute rally in January crude oil, which today is its last trading day, couldn?t help corn futures end in positive territory. March Corn closed at $3.80 3/4 , down 8 3/4 cents.

Soybeans

January soybean complex futures closed mixed this trading day. While soybeans and soy oil closed down for the day in the pit and computer, soy meal closed higher. The strong rally of the US Dollar Index and weakened corn futures provided the selling pressure to the declining soybean future values.January Soybean finished at $8.68 1/4 , down 1 1/4 cents; Jan Soy meal finished at $267.50, up $1.20; Jan Soy oil finished at $30.60, down 10 points.

Wheat

Today was the last day for the open outcry AKA pit trading for wheat at the Minneapolis Grain Exchange after a 125 year run. They are going full electronic. This sad news didn't conjure enough sympathy from traders to help CBOT, KCBT and MGEX nearby wheat futures to end up for the day. Even weather conditions threatening winterkill weren?t enough to provide bullish trading for wheat futures. Spillover selling from its grain brethren and a strong rally of the US dollar Index provided the selling pressure.CBOT March Wheat closed at $5.63 1/4 , down 8 1/4 cents; KCBT March Wheat closed at $5.83, down 7 1/2 cents; MGEX March Wheat closed at $6.25 1/4 , down 5 3/4 cents.

eCBOT Close/Early Call

End-of-the-week profit taking is likely to stall the corn, soybean, and wheat markets' short-term higher trends Friday, especially since crude oil is on a bearish path.

eCBOT grains closed lower, pressured by a stronger dollar, weak crude and pre-Christmas book-squaring.

Beans closed around 8c lower, with wheat off around 12c and corn 11-13c easier.

Crude is sharply lower again at $34.50/barrel.

The dollar is firmer across the board, advancing the most against the euro in almost two months, in a correction from recent steep losses in the wake of the Fed rate cut.

The dollar climbed 2.3 percent to $1.3910 versus the euro, from $1.4240 late yesterday, when it slumped to a 12-week low of $1.4719.

The greenback is also sharply higher against the pound at $1.4960, from a low of $1.5612 yesterday.

An important weekend weather-wise lies ahead, with US wheat crops under threat from freezing temperatures on the Plains, and corn and soybeans wilting in South America from soaring temperatures and lack of rain.

Fairly widespread showers are forecast in parts of Brazil and Argentina this weekend, which is adding to the bearish feel this afternoon.

The dry conditions are speeding harvesting of Argentina's drought-stressed wheat crop, which is now ahead of last year's pace.

Early calls for this afternoon's CBOT session: Corn Down 9-11c,Soy Down 5-10,Wheat Down 10-12c.

South American Weather: Hot And Dry

High temperatures of 93 to 99 degrees yesterday across much of the major corn and soybean growing areas of Argentina and southern Brazil shows that there is some weather-related stress on the young crops in that areas, report Freese-Notis Weather.

All of those areas will stay hot for today and tomorrow; if anything a bit warmer than what has been seen so far this week.

Northern Argentina and southern Brazil will stay hot for Sunday, and while temperatures for the rest of next week will not be quite as bad there will be plenty of days with highs reaching the lower to middle 90s.

Since November 1, it has been exceptionally difficult to get the areas in question into a truly wet weather pattern. Were it not for a major rain event in Argentina in late November, and an exceptionally wet weather pattern in southern Brazil prior to November 1, problems right now would be severe.

UK Dairy Sector: What Lies Ahead In 2009?

Farmgate milk prices in the UK have risen throughout 2008, and the rolling 12 month average should reach 26p/litre by March 2009. But dairy farmers’ costs of production have also been rising just as fast, warns farm business consultant Andersons.

"However, the 2007/08 and 2008/09 milk years should return the sector to a reasonable level of profitability that gives producers some return on capital," says the firm's head of business research Francis Mordaunt.

"The continued upward movement in prices is somewhat against the EU and world trends. A continued lack of supply in the UK, as producers have left the sector, has helped insulate the remaining farmers from falls in dairy commodity prices elsewhere, and the link with cost of production established by some retailers for the liquid market will have helped those producers who signed up.

"The recent 2p/litre cut in milk price by Dairy Farmers of Britain, although driven by business restructuring, may be the start of other price cuts. The retailer tracker schemes will pick up the cost reductions from March 2009, and these price cuts will certainly be followed by other milk buyers, particularly those sourcing for commodity processing, who have not already cut prices," says Mr Mordaunt.

Other factors will continue to drive producers out of milk production. Age or retirement, historic under-investment, the need to respond to NVZ regulations and a lack of optimism in all parts of the industry are likely to contribute.

The livestock industry as a whole was faced with sharply higher feed costs during 2008. Not simply from the headline rises in cereal prices, but also from rapid increases in the price of the proteins like soya. For 2009, producers can look forward to some costs reducing, although for some it may take time before these to feed through to farm margins, says Mr Mordaunt.

"Any production systems relying on grass are likely to see costs moving in the opposite direction. Most fertiliser for the 2009 season has already been contracted at far higher prices than were paid in 2008. If fertiliser prices have permanently shifted to a different level, then there will be increased interest in the targeted use of livestock manures to replace at least part of the purchased fertiliser requirement. Although the new NVZ regulations are obviously unwelcome in terms of the increased costs they impose on farmers, it may be possible to make the best of a bad job and use stored manures effectively."

Rotterdam Increases Biofuels Throughput

The transhipment of biofuels through the port of Rotterdam increased in the first half of 2008 from 1 mm tons to 2.5 mm tons, the port authorities report.

The ratio of ethanol to biodiesel was split approximately 50/50, they say.

The products were manufactured mainly overseas: ethanol from Brazil and biodiesel largely from the United States. Part of the incoming trade was used on the continent and some shipped on further by smaller sea-going vessels to England and Scandinavia in particular, they add.

The outgoing flow, however, also contained production from the continent, brought in mainly by barge.

Biodiesel throughput showed a particularly sharp increase: almost tripling from 430,000 tons in the first half of 2007 to 1,300,000 tons. This trend is expected to continue in the second half of the year.

In 2009 two plants with a joint capacity in excess of 600,000 tons are expected to begin production in the Rotterdam port area.

Brazilian Farmers Feeling The Pinch

Farmers in Brazil, are experiencing problems obtaining finance, for the purchase of additional cattle and paying the rising costs of their expenses.

Brazilian farmers have been saddled with large amounts of debt in recent years, while the rural sector has expanded at an extraordinary rate.

The costs of producing corn, soy and cotton, are expected to increase 42% in 2009, according to industry analysis.

Farmers have been placed in a position where they have to forgo debt re-payments, in order to free up cash for day to day running of their farm properties.

There are stories circulating of the re-possessing of tractors and combines, and even of some large farms.

Michael Cordonnier of the Corn and Soybean Advisory, a consulting firm from Chicago, said "Now many farmers are rationing fertilizer and other supplies, which could translate into lower yields for next year".

Many Brazilian farmers, had hoped the booming grain market experienced in May, June and July would dig them out of debt. But with domestic prices having halved since then, those hopes have all but evaporated.

The Chinese Are At It Again

Health inspectors have raided 22 meat stalls in Hong Kong, after reports of an illegal coloring being used on frozen meat, to give it a colourful fresh meat appearance.

Government officers in plain clothes, from the Food and Environment Hygiene Department, collected samples of beef and sausages from several markets.

After testing 290 samples, 15 were found to contain the banned substance.

The colouring in the meat, is said to have a harmful effect on humans, if taken in sufficient quantities.

This comes in the wake of the melamine scandal, on the Chinese mainland with melamine being used in animal feed and dairy products.

Ireland - Authorities Begin Slaughtering Cattle In Dioxins Latest

Cattle from 21 farms in the Republic of Ireland, have had the test results for dioxins in the meat prove positive.

The Department of Agriculture has acted promptly, and ordered the culling of cattle from the affected properties, and they are to be destroyed and not enter the food chain.

"This is going to have a devastating effect on the Irish meat and farming industries, who have spent the last 40 years building a world class reputation for quality, traceabilty and safety in all of their food products," said an industry spokesman.

The Food Safety Authority of Ireland (FSAI), released a statement on Thursday night stating, "The trade withdrawal of meat from the 21 farms in question was initiated on Tuesday and is ongoing".

Alan Reilly from the FSAI, said meat not already consumed will be re-called and all animals on the farms will be destroyed

Russia May Become A Net Grain Importer By 2012

Russia is the largest country in the world, covering 17,075,400 square kilometers, from the Bering Sea twenty kilometers from Alaska, to the Baltic Sea in Europe. This emerging economy has an insatiable appetite for western meat, as well as meat technology and equipment

Whilst little was known about the old Soviet Union, which included all countries east of Germany, even less is known about modern day Russia and its 142 million population. This is a nation that is debt free, oil rich and eager to do business, Moscow the capital is the most expensive city in the world. There are more billionaires residing in Moscow than in London or New York.

The majority of the European supermarket chains are now operating in Moscow, which has a population of 12 million and in the second city St Petersburg, whose population is around 5 million. McDonalds, Kentucky Fried Chicken, Pizza Hut and Starbucks can be found on every corner, along side the showrooms for Rolls Royce, Bentley and Porsche, Russia is the worlds largest buyer of all three makes of car.

The Soviet Union from the end of the second world war until 1991, controlled its "satellite countries" of Poland, Hungary, Romania and the former Yugoslavia, which are the best beef producing countries in eastern Europe, with a combined cattle herd of 125 million cattle. In the Soviet days these countries exported prime beef to western Europe, with ample supplies left over for the domestic market. Yugoslav and Romanian beef was considered the best in the world, suckled on small farms and hand fed like family pets.

Since 1991 and the fall of the Soviet bloc, when independence came for the satellite countries, Russia turned to South America for its beef imports and more recently Australia. The United States, Denmark and Germany catered for poultry and pork supplies. The previously mentioned satellite countries, turned to the west and now are members of the European Union, restricting them from exporting meat to Russia.

The cattle herd in Russia today is 25 million head , whilst the nations total meat requirements are 7.5 million tonnes. Russians consume 50 kilos of meat per capita, a figure that is increasing at extraordinary rates. Projections are that by 2012, Russia will consume 10 million tonnes of meat per year. Domestic production of meat currently provides 4.7 million tonnes, leaving a shortfall of 2.8 million tonnes to be imported, making Russia the worlds largest meat importer.

Traditionally beef and pork are the most popular meats, along with many varieties of sausages, eaten cold in summer and hot in winter often in broth or stew. Poultry consumption has tripled in the last fifteen years, with imports now being double those of pork. The emergence of a wealthy middle class with high disposable incomes, has seen a high restaurant culture and the demand for more delicacies, in primal cuts of imported beef.

Australia has pioneered a lucrative trade in kangaroo meat, with the Far East of Russia in the frozen parts of Siberia, Kamchatka and Vladivostok, where the diet was previously reindeer and horse meat, mainly used in broth because of the cold artic temperatures. The plants in the Far East, have readily adapted to the use of kangaroo meat in sausages, salami and for general retail trade as stewing meat, replacing the need for reindeer meat. This trade has been very beneficial to Australia and for Russia who could never obtain sufficient quantities of reindeer meat. Australia are the main suppliers of horse meat to Russia followed by Argentina. Russia is the worlds largest importer of horse meat.

Russia plans to be self sufficient, in the production of pork and poultry within the next five years, however beef production is not expected to catch up with demand for at least fifteen years.

This rapid expansion in meat production will consume vast quantities of grain, quickly absorbing the nation's exportable surplus and possibly turning it into a net importer by 2012.

Argy Dairy Farmers Protest

Dairy farmers from around Buenos Aires, sent 1,200 Holstein cows into the cattle market of Liniers on Thursday, to be sold for slaughter at knockdown prices.

This was part of a protest, against the lack of economic viability in the dairy farming sector.

President of the General Dairy Farmers Union, Emiliano Mondarain, said "we are sacrificing a lot of animals we have great affection for, cattle that we have been working with for generations".

The Holstein cows have a primary role in milk production, and the action is being taken to encourage dialogue with the government, according to the farm leader.

He went on to say, "we have been calling for dialogue with the national government for some time, yet nothing has been forthcoming".

The farmers claim they are receiving only US23 to25 cents per litre, not the agreed price of US31cents, that was agreed with the government in October.

The cows were sold to the meat plant buyers, for an average of 45c/kg USD live weight.

AWB, ABB Merger Not Completely Dead And Buried

Although AWB and ABB Grain have called off merger discussions, farming groups are not so sure it is the end of the issue.

Industry speculation is that there was a failure to agree on the valuation split of the companies, with ABB currently having a marginally larger market capitalisation than its historically larger suitor in AWB.

Although the merger is off the cards for now, speculation is that is only the first cut and thrust in more protracted negotiations.

Some within the trade are not sure that consolidation within the grains industry needs to be done in the near term.

One source, who declined to be named, suggested that a deregulated grains industry was too immature to warrant immediate mergers.

More time is required to analyse the nature of the new industry, he said.

Irish Pig Feed 'Saturated' With Toxins

The level of toxins in the pig feed that caused the recent €220m-plus recall of pork products was more than 5,000 times the EU limit, report the Times.

Such was the concentration that scientists at the UK’s Central Science Laboratory (CSL) in York were initially unable to quantify the level, which went “off the scale”.

Feed samples taken from Millstream Recycling in Carlow were so badly contaminated that all the equipment used in the laboratory had to be “scrupulously cleaned” afterwards, causing a “logistical nightmare” for the scientists.

“We weren’t expecting it to be anywhere near the level that we found,” said Martin Rose, head of the Environmental Contaminants team at the CSL. “It saturated the detector. We injected the sample into the machine and it went off the top of the paper. It was off the calibration range. We knew it was over 2,000 times over the limit, but we could tell that it was probably much higher than that.”

After alerting the Irish authorities to the extreme contamination of both the feed and pig-fat samples, which had 80-200 times the EU limit for dioxins, Rose’s team conducted further tests on the feed. The concentration of chemicals in the samples meant it was too high to measure.

So the scientists had to water down the specimen before attempting to re-analyse the dioxin levels. “We diluted the extract and calculated that there was in excess of 5,000 nanograms of dioxins per kilogram present,” said Rose.

Ex-Dairy Boss Gets 10 Years For Fraud

The founder of Italian Dairy Group Parmalat, Calisto Tanzi, has been sentenced to 10 years in prison for fraud relating to the collapse of the dairy group.

Tanzi was accused of manipulating the share price, hindering auditors and helping with false accounting.

Parmalat collapsed in 2003 with a 14bn euro ($20bn; £13bn) hole in its accounts in what remains Europe's biggest bankruptcy.

The other seven defendants, including executives and bankers, were acquitted.

Another eight defendants settled out of court in September.

More than 40,000 investors are seeking compensation for losses.

The court will now decide whether Tanzi should pay damages to them.

Parmalat was restructured and relisted on the Milan stock exchange in 2005 and is once again Italy's biggest market-listed food group.

It has recouped money from its banks in settlements since the collapse.

Tanzi will probably not begin his jail term straight away because under Italian law the sentence of the Milan court must be confirmed first by an appeals court.

Tanzi is also a defendant in a separate trial under way in Parma, where he is accused of fraudulent bankruptcy.

Overnight Market Developments

eCBOT futures are lower across the board as crude oil dives to it's lowest levels since 2004.

Soybeans are 4-5c easier, with corn down 6c and wheat around 10c lower.

With crude it seems to be a case of buy the rumour, sell the fact. Despite OPEC announcing it's largest production cut in a decade prices fell below $36/barrel in late trade last night and currently stand at $36.65.

The grains sector continues to do it's best to distance itself from crude, which has fallen an astonishing 33% this month alone.

Corn could be the biggest loser in all of this, if the US ethanol industry wasn't able to stand on it's own two feet at $147/barrel, what chance has it got now?

Year-end holiday demand is helping support the Chinese market, who were featured buyers of soybeans in yesterday's USDA export sales report.

The dollar consolidated modest gains during Asian trading that were made Thursday in New York on the back of the decision by the ECB to cut the rate on deposits with the central bank. The Bank of Japan cut rates by 20 points overnight to 0.10%.

Reports suggest that GM and Chrysler will get aid from the Bush administration as soon as today. The loans are likely to be sufficient to keep them afloat until March, effectively passing the buck to Barak Obama, sources say.

Camera-maker Polaroid has filed for US Chapter 11 bankruptcy protection amid allegations of fraud by the founder of its parent group.

CBOT Closing Comments

Corn

At the CBOT, Corn opened higher but ended unchanged for the day. At the NYMEX, Crude oil closed below $37 dollars, which isn't friendly to corn futures because of the ethanol dependence on fuel prices. The US Dollar Index ended in positive territory. A rally in the dollar is a disadvantage for export sales on the world market. This morning the USDA released its weekly export sales numbers. The week ending 12/11, US corn exports were 3.147% up from the previous week yet net new sales were down 34.044% for the year. These placed a mixed selling pressure to corn future contracts, thus an unchanged session. CBOT March Corn finished unchanged at $3.89.

Soybeans

CBOT January Soybeans traded higher overnight and ended up for the day. The US Dollar Index closed up, which is not friendly to soybean futures, but a higher wheat market helped with soybeans. Heating oil futures (diesel) reversed course and closed lower, putting pressure on soy oil. The USDA weekly export sales numbers for soybeans for the week ending 12/11 were up 21.886% from the previous week, and up 10.346% from the previous week for net sales. January soy meal and soy oil closed mixed, as meal ended up while oil ended down. CBOT January Soybean closed up 5 at $8.69; January Soy meal closed up 3.10 at $266.30; January Soy oil closed down 30 points at $30.70

Wheat

Wheat ended the session with double digit gains for the day. US Wheat export sales numbers for the week ending 12/11 were up 29.081% for exports from the previous week and up 9.508% for net sales. Wheat opened higher and extended gains while corn and soybeans opened lower. Wheat?s positive price support came from continued weather concerns and a lowered crop estimate by the USDA. End of year profit taking in wheat?s case means buying. CBOT March Wheat ended up 14 cents at %5.71; KCBT March Wheat ended up 12 � cents at $5.90; MGEX March Wheat ended up 12 cents at $6.31.

EU Wheat Mixed On Currency

EU wheat futures closed mixed, with London prices steadier as the pound fell to another all-time low against the euro. Paris prices closed flat.

Paris March milling wheat closed unchanged at EUR129.50/tonne. London March feed wheat ended up GBP2.20 at GBP101.20/tonne.

London managed a nine-week high as sterling crashed to yet another new low against the euro. Suddenly 2.75% interest looks like a very good rate.

Strategie Grains and others are starting to suggest that 2009 plantings might not produce such high output as many have been suggesting.

We shall see.

Keep your eye on Burton's window again.

USDA Weekly Export Sales/Shipments - China Takes Almost 1MMT Soybeans

For the week ended Dec 11 the USDA has announced the following export sales:

Corn 612,500 MT 2008-09 (vs expectations 550,000 to 750,000 MT)

Wheat 262,100 MT (250,000 to 400,000 MT)

Soybeans 893,600 MT 2008-09; 6,700 MT 2009-10 (600,000 to 700,000 MT)

Soymeal 62,200 MT 2008-09; 400 MT 2009-10 (50,000 to 100,000 MT)

Soyoil 1,500 MT (5,000 to 10,000 MT)

Soybean sales stand out as being particularly strong, with 823,100 MT, including 156,000 MT switched from unknown destinations, going to China.

Export shipments for soybeans of 1,154,700 MT were also impressive, again China taking the lion's share at 972,800 MT.

Corn exports during the period were 710,200 MT, and wheat exports 415,400 MT.

eCBOT Close/Early Call

eCBOT grains closed higher supported by a sharply weaker dollar. Beans ended the overnight session around 5-7c firmer, with corn 4-5c higher and wheat up 6-8c.

With US interest rates now effectively at zero, there is a growing concern that the dollar's safe-haven status is no more. All of a sudden rates of 2.75% in the Eurozone look positively stratospheric.

This may help US grains exports in 2009. At least that's the theory.

Strategie Grains peg the EU 2009/10 grain production down 6% to 292mmt, with wheat production down 5.4% to 132.7mmt.

The Australian wheat crop is still under threat of further quality downgrades as rain continues to hamper harvest progress in WA, NSW and Victoria.

The Argy wheat crop has been downsized by the Ag Secretariat to 9mmt, almost 44% down on last year.

Russia's 2008 grain harvest is now put at a final figure of 105.5mmt in clean weight by the Russian Ministry. They will double their intervention purchases to 20mmt to shore up prices and insure against a crop disaster in 2009, they say.

Assorted wheat tenders are kicking around, with Japan buying US/Australian wheat, Jordan taking Russian wheat and Israel booking Ukraine wheat.

Waiting in the wings are Pakistan tendering for 500,000mt US wheat for completion Dec20th and Saudi Arabia tendering for a similar quantity of optional origin 12.5% protein wheat for completion by 5th Jan.

Another very cold weekend is in store for the US Plains, putting winter wheat crops under threat of winterkill.



Early calls for this afternoon's CBOT session: Corn futures are expected to open 4 to 6 higher; soybeans 5 to 7 higher; wheat 6 to 8 higher.

Pound And Dollar Slump Further

The dollar and the pound have weakened further as interest rate cuts continue to undermine the two currencies. The dollar fell to 1.4717 and the pound to 95.05 pence.

On Tuesday, the Federal Reserve cut its key interest rate to a range of between zero and 0.25%, the lowest since records began in 1954.

With US rates set to remain low for many months, and with the head of the European Central Bank hinting recently that it is unlikely to cut its rate of 2.5% in January, the dollar is expected to remain weak against the euro.

With UK rates also lower than those in Europe, the euro is strengthening against the pound.

Amongst a plethora of bad economic data for the UK came a government report showing that the UK’s budget deficit widened to a record in November as tax revenue declined because of the worsening recession. A separate report showed mortgage lending fell 51 percent in November from a year earlier.

The pound has plummeted this week with other separate reports showed jobless claims rose last month at the fastest pace since 1991, house prices extended declines and inflation slowed.

On Wednesday, minutes from December's meeting of the Bank of England's Monetary Policy Committee (MPC) showed that it discussed the possibility of cutting rates by more than one percentage point. In the end, it cut rates to 2% from 3%.

The Financial Times report that the deputy governor of the bank, Charles Bean, told it that rates could approach zero.

The prospect of further sharp rate cuts by the Bank of England has sent the pound to a fresh low against the euro, and many commentators believe the pound could reach parity with the euro before long.

Russia To Double Grain Intervention In 2009

The government will double its grain-intervention program next year and buy nearly 20 million tons of grain, said First Deputy Prime Minister Viktor Zubkov, speaking at a meeting on Tuesday in the Moscow region.

Increasing grain purchases will "give us the necessary reserves for a bad harvest in the future," Zubkov said, Interfax reported.

He added that this will allow the country to export grain in more favorable market conditions.

After global and domestic prices plummeted early in the harvest season, the government began buying and storing millions of tons of grain to prop up prices and protect its producers and exporters from further price drops.

Since May, Russian grain prices have fallen more than 50 percent. As of Dec. 8, Russian class-3 wheat stood at 4,344 rubles per ton, down from 9,128 in May.

The government, which has bought wheat at up to a 25 percent premium to market prices, has spent 15.1 billion rubles on 3.2 million tons of grain, and before the end of the year it plans to buy another 1.8 million tons.

The Biggest Punt Of All-Time?

With crude oil skidding below $40/barrel last night, despite OPEC's best efforts, I thought it would be an interesting exercise this morning to run off a fresh chart plotting the relationship between crude oil and CBOT grains.

Certainly, the grains and crude appear to have been very closely linked during oil's meteoric rise to all-time highs during the first half of 2008.

As the chart shows, however, despite crude having fallen 60% in the last six months, CBOT grains have had a more modest price decrease. Indeed, since early October, soybeans, corn & wheat have moved further and further apart from crude.


Crude vs CBOT Corn, Soybean & Wheat - Click Image To Enlarge

I guess that this is maybe no great surprise. With crude at $40/barrel grains are being viewed as grains again, not a fuel raw material. With crude over £100/barrel things looked a little different.

Will crude ever get back to those levels? I think so & more. In fact I think $100/barrel will be cheap sometime in the not too distant future. It has to be a long-term cause for concern that the current financial melt-down sees plans for the development of new oil fields being shelved. Why bother looking for more oil when it's only $40/barrel?

I think this will come back to bite us on the bum sometime in the future. When? Who knows, how long is a piece of string? Three/five years down the line maybe? You can buy futures as far forward as 2013 below $70/barrel at the moment. That could be the biggest punt of all-time.

Ukraine Grain Stocks - Dec 1st.

The Ukraine statistics committee reports that Ukraine’s grain stocks in the country amounted to 24.0 mln t as of Dec. 1, 2008 and were thus 57% above the 15.3 mln t recorded one year earlier. Wheat stocks were 12.0 (7.0) mln t.

For the 2009 crop, the winter wheat acreage should be 2% lower at 6.5 (6.7) mln ha, while the winter barley area is expected to be 49% higher at 1.3 mln (850,000) ha. The winter rapeseed area should be 6% lower at 1.4 (1.5) mln ha.

Overnight Market Developments

eCBOT grains are mixed, mostly slightly lower overnight with soybeans down a cent or so, corn 1-2 cents easier, and wheat up 3/4c to down 1/4c.

The weak dollar remains supportive for the entire complex.

There is reasonable export interest around for wheat this week, although competition remains fierce with the usual suspects, Russia and Ukraine, particularly aggressive.

Japan bought 62,000mt wheat overnight, 41,000mt US origin and 21,000mt Australian origin.

The Argy Ag Secretariat dropped it's estimate of output there for the current crop to 9mmt, 7mmt below last year's levels. This could open up the door for increased US exports to Brazil during 2009.

Crude is hovering around the $40/barrel mark despite OPEC's 2.2m bpd cut, as the market focused more on waning demand.

There is scepticism as to which OPEC members, apart from Saudi Arabia, will actually stick to their reduced quota, with the likes of Iran, Nigeria, Algeria etc likely to privately take the view that $40/barrel is better than nothing.

The dollar is at 2 1/2 month lows against the euro. Who wants dollars when interest rates are 0.25%? The pound is down again to fresh all-time lows against the euro currently standing at 1.0671, with one euro now worth around 94 pence. Against the dollar we are $1.5420.

The pound's demise yesterday saw London wheat close a pound or two higher, today's further declines are also likely to support. Where, however, is the new export business we should be picking up at these levels??

The government confirms that it has held talks with Jaguar Land Rover over the possibility of state aid for the carmaker.

Meanwhile, struggling US manufacturer Chrysler is to halt production at all 30 of it's plants for one month, in an effort to save money until (they hope) Barak Obama gets his chequebook out in January.

Regulators Probe Madoff's Wife

U.S. regulators are investigating Ruth Madoff, wife of alleged fraud mastermind Bernard Madoff, on suspicion that she maintained secret records used in a $50 billion Ponzi scheme.

The Securities and Exchange Commission have found evidence she may have helped track payments, and are also examining why her name appears on related transactions, reports Bloomberg.

World Crop Weather

USDA's Joint Ag Weather Facility has provided the following weekly weather/crop highlights:

EUROPE – Wet Weather Benefits Southern Winter Grains: Widespread rain in Spain and Italy boosts reservoir levels and provides topsoil moisture for emerging winter grains. Seasonably cold weather across central and northern Europe allows winter crops to go fully dormant, while above-normal temperatures in Poland melt the region’s protective snow cover.

FSU – Most Winter Grain Areas Lack A Protective Snow Cover: Mild weather continues to keep most winter grain areas in Ukraine and Russia snow free, leaving crops exposed to potential extreme cold.

SOUTHEAST ASIA – Favorably Dry In Vietnam; Wet Throughout Indonesia: Favorably dry weather in Vietnam aids coffee harvesting nearing completion, while also benefiting winter rice harvesting and early winter-spring rice planting. Showers in Indonesia slow oil palm harvesting but benefit rice.

SOUTH ASIA – Showers In Pakistan: Unseasonably heavy showers in Pakistan hamper cotton harvesting. Dry weather across India promotes rice and cotton harvesting.

MIDDLE EAST – Rain Benefits Turkish Winter Grains: Rain in Turkey provides topsoil moisture for vegetative winter wheat and barley.

NORTHWEST AFRICA – Wet Weather Continues To Hamper Fieldwork: Locally heavy showers in Morocco and Algeria slow winter grain planting but maintain favorable moisture for crop emergence and establishment. Mostly dry weather in Tunisia promotes a rapid pace of fieldwork, although showers return by week’s end.

AUSTRALIA – Wet Weather Continues: Widespread, locally heavy rain falls across much of the Australian wheat belt, further slowing winter grain harvesting and maintaining concerns about grain quality. In eastern Australia, the wet weather benefits vegetative summer crops.

SOUTH AMERICA – Rain Reaches Southern Brazil; Dry Pockets Persist In Argentina: Scattered showers bring some relief from dryness to corn and soybeans in southern Brazil. Rain maintains overall favorable conditions for soybeans in key farming areas of central Brazil. Rain benefits Argentina’s western farming areas. However, pockets of unfavorable warmth and dryness continue in central and northern Argentina, limiting moisture for emerging summer grains and oilseeds. Winter wheat harvesting is advancing rapidly.

SOUTH AFRICA – Conditions Are Favorable In Much Of The Corn Belt: Rain maintains favorable moisture levels for emerging summer crops in the eastern corn belt as drier weather promotes planting in the west.

Argy Wheat Crop Downsized To 9MMT

The Argy Ag Secretariat say that this season's wheat crop will now only yield 9mmt, down 1.1mmt from last month's estimate, and 7mmt below output a year ago.

Drought led to lower plantings this year and has persisted throughout the growing season, hampering crop development.

The crop is slightly over halfway harvested, they added.

With a domestic consumption of 7mmt, this would leave just 2mmt available for export next year. The USDA may want to look into this as their current estimate for Argy exports next season is 5.8mmt!

Brazil is traditionally the biggest export home for Argy wheat, and may well have to turn to the US for extra supplies in 2009.

Meanwhile 80% of the corn crop and 89% of the sunseed crop has been planted so far, said the Secretariat. Weather conditions remain largely dry, and neither crop is off to a great start.

Weather conditions for soybeans become more critical in January, analysts said.

EU Wheat Ends Mixed On Currency

EU wheat futures closed mixed Wednesday with Paris milling wheat lower and London feed wheat higher. A sharply weaker dollar threatened French competitiveness on the export market. However a fresh plunge to all-time lows against the euro for sterling helped London wheat close higher.

March Paris milling wheat ended down EUR1 at EUR129.50 a tonne. London January feed wheat closed up GBP2.00 at GBP95.50/tonne.

Export orders for EU wheat still remain scant however. Jordan bought 50,000mt Russian hard wheat and Israel plumped for Ukraine feed wheat in a tender.

Both the Russian ruble and the Ukraine hryvnia are under severe pressure, meaning that they will continue to eagerly mop up any export orders around.

Weather remains a threat to US wheat in the Plains, with Arctic air threatening unprotected crops there with winterkill.

Things continue to go from bad to worse for the Argentine wheat crop with the Agricultural Secretariat trimming it's forecast for the current crop to 9mmt, from 10.1mmt previously. That's a 7mmt drop on 12 months ago, and the lowest estimate in the marketplace yet.

CBOT Closing Comments

Corn

Corn closed lower today after opening higher from overnight trading and sustaining double digit losses through the midday session. Profit taking and crude oil trading lower during the session provided weakness in corn prices. Though a lower dollar provides a positive trading support to corn futures, the effects from profit taking and a drop in crude oil futures trump this positive effect. This morning the Energy Department released their weekly US totals of petroleum products. US total gasoline ending stocks for the week ending December 12 was about 204 million barrels, up 0.64% from the previous week. This additional news item was not kind to corn futures due to corn ethanol production relation to petroleum, namely gasoline. CBOT March Corn closed $3.89 per bushel, down 44 cents

Soybeans

Soybeans closed higher in the pit today after opening higher from overnight trading and trading lower during the midday session. Profit taking and lower crude oil futures helped lower soy complex futures, but bullish trading activity in wheat and a midday bull run in the financial markets helped the soy complex to end positive. A lowered dollar index also contributed to the positive close of the soy complex. CBOT January soybean closed $8.64 per bushel, up 5 1/2 cents; January Soy meal closed $263.20 per short ton, up $2.20; January Soy oil closed 31 cents per lbs, down 35 points

Wheat

Wheat at the CBOT, KCBT and MGEX all closed higher today. A lowered Dollar Index and a moderate midday bull run in the financial market helped wheat futures move to positive territory. US wheat exports have been weak of late due to cheaper wheat supplies abroad but with the sharp declines in US dollar help to bring some buying interest back. US have finer quality milling wheat, while most Black Sea wheat are only feed quality grade. CBOT March wheat closed at $5.57 per bushel, up 13.4 cents; KCBT March wheat closed at $5.78, up 13.2 cents; MGEX March wheat closed at $6.19, up 11.6 cents.

OPEC Cuts 2.2M Barrels/Day

OPEC says it is cutting crude oil output by 2.2 million barrels a day - the largest cut ever announced by the cartel.

The accompanying statement was at pains to point out that this latest cut takes 4.2 million bpd off the table compared to September production levels.

This figure comprises half a million barrels/day of overproduction cut in September, plus last month's 1.5 million barrel reduction.

In a concerted effort to shore up prices, Russia and Azerbaijan also announced reduced output of 600,000bpd.

January crude oil initially seemed relatively unmoved by the announcement trading flat around $43/barrel.

eCBOT Close, Early Call

eCBOT grains closed higher Wednesday, buoyed by a weak dollar and steady crude oil.

Soybeans finished the overnight session around 13-14 cents higher, with wheat up 9-10c and corn 4-5c firmer.

The dollar fell to two-month lows against the euro after the Fed slashed US interest rates to just 0.25%.

Crude oil is steady in the mid $40's/barrel ahead of an announcement from OPEC today which is expected to cut production by 2m barrels/day. Russia may also weigh in with a separate cut of up to 400,000 barrels/day of its own. The concerted move comes in an attempt to shore up prices which have fallen around 70% from their summer highs.

Extremely cold Arctic weather in the US Plains is threatening young wheat crops in Kansas, Oklahoma, Texas, Nebraska and Colorado.

Temperatures have fallen well below the freezing point and below zero degrees Fahrenheit in the Northern Plains, leading to worries some of the crop may have been killed off.

Taiwan bought 56,030mt US wheat overnight, Japan are expected to confirm a purchase of US/Canadian wheat today. Saudi Arabia are said to be tendering for 500,000mt wheat shortly, and Pakistan and Iraq are also in the market.

Dryness in Argentina is a problem at the moment, particularly for earlier planted corn. Heat is going to become notable as well. Temperatures in the low 90s returned to Argentina for this past Sunday and Monday, and there will be more of that right through the end of the coming weekend. In fact, by Sunday, highs could top 100 degrees in parts of their growing area.

Early calls for this afternoon's CBOT session: Corn futures are expected to open 4 to 6 higher; soybeans 12 to 15 higher; wheat 8 to 10 higher.

AWB, ABB Merger Is Off

A potential merger between AWB Limited and ABB Grain Ltd is over after the companies announced today that discussions on the proposed deal had ended.

The companies confirmed in separate statements issued to the Australian Stock Exchange this afternoon that merger discussions had ceased.

The two had said last month they were looking at forming an agribusiness group with the strength to better compete with commodity trading giants such as Cargill Inc in Australia's deregulated grain industry.

The merger would have created a $2 billion grain conglomerate and was floated just months after discussions believed to have been held between ABB Grain and the CBH Group on a similar proposal.

AWB said the merger discussions had ended because the parties had been unable to agree on appropriate commercial terms.

In a separate statement ABB Grain said it would continue to review potential merger and acquisition opportunities in the global agriculture sector.

Fertiliser Prices Collapse

Hands up if you saw that one coming. Right, so that's everybody then.

The price of urea, the world's most common nitrogen fertilizer, rose from about $280 to $405 per ton in 2007 and reached $452 in April 2008. The price then soared to $815 per ton in August, but has subsequently plunged to $247, lower than before the price spiral began, by mid-December, according to the IFDC.

The price of diammonium phosphate (DAP) increased by five times—from $262 to $1,218 per ton—from January 2007 to April 2008, but had fallen to $469 per ton in mid-December, they say.

"The high fertilizer prices caused 'demand destruction.' Farmers were unable or unwilling to pay two or three times the prices of early 2007," the IFDC says. The collapse of the global credit market, a trade recession, and slowdown in world economic growth worsened the situation.

Potash is the only fertilizer whose price is still rising. Standard grade muriate of potash, the most common source of potassium, sold for $172 per ton in January 2007 and $875 per ton in mid-December.

Potash prices have stayed high due to its shortage and difficulties in transporting Russian potash because of an enormous and expanding sinkhole near the Silvinit mines.

Another New Euro Low For Sterling

More bad economic data has sent the pound sprawling to yet another fresh all-time low against the euro, hitting 1.0867 late morning, with one euro breaching 92 pence at 92.05.

A U.K. employment report showed a 75,700 rise in jobless claims, which was the largest increase since 1991.

The total number on jobless benefit is now 1.072 million, surpassing the psychologically-important one million mark for the first time since 2001.

Minutes from teh BOE's MPC meeting showed that this months 1% cut in rates was the minimum reduction considered, pointing to lower rates ahead. With eurozone rates already running at 0.75% above those in the UK, that gap looks set to widen further.

USDA Set To Get New Boss

Former Iowa governor, Tom Vilsack, is expected to be named as the new head of the USDA, replacing Ed Schafer, at a Chicago news conference later today.

Vilsack will join Obama at the news conference scheduled to begin at 10:45 a.m. Chicago time.

Vilsack dropped out of the presidential race in 2007 and backed Senator Hillary Clinton before campaigning for Obama in the general election.

Vilsack’s experience as a state legislator and leader of the nation’s largest corn-producing state makes him well-qualified to lead the third-largest Cabinet department in spending.

Amongst other things, Vilsack will be responsible for administering the President-elect's promised $150 billion in renewable energy investment over the next 10 years, making ethanol production a key issue for the new man.

Like Obama, he has publicly nailed his colours to the ethanol mast, linking farming to energy independence and national security.

BOE Minutes Show Larger Rate Cut Was Considered

The Bank of England's rate-setting body voted 9-0 to cut rates to 2% this month and considered a bigger move, minutes from its meeting released today have shown.

The monetary policy committee (MPC) agreed that a cut in the Bank rate from 3% to 2% was the minimum needed.

However, it avoided a deeper cut on concerns it could hit the pound and undermine confidence in the economy.

The minutes are likely to reinforce expectations that UK rates will fall further in the months ahead.

The MPC appeared to welcome the sharp fall in sterling in recent weeks, saying it should support the economy by boosting export growth while the fall in the oil price would lift consumer spending power.

In today's minutes the MPC also noted the importance of getting banks lending again but added that interest rates alone would not be enough to tackle limited credit availability.

"Further measures to underpin lending growth would be needed, building on the government's package announced in October to recapitalise and guarantee funding to the banks," they said.