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.