Nogger's Blog

Crude Closes At Five Month Low Friday

Crude oil for October delivery fell $1.66 to settle at $106.23 a barrel Friday, the lowest close since April 4. Oil has now dropped for six straight days, the longest stretch since April 30, 2007.

Dollar strength and rising US unemployment numbers were to blame traders say.

OPEC meet in Vienna on Sept 9th to discuss possible reductions in output in an effort to shore up prices threatening to break through $100/barrel.

Meanwhile Hurricane Hanna has posed no threat to US operations in the Gulf of Mexico, all eyes now turn to Cat 3 Hurricane Ike which may enter the region midweek.

Another US Bank Collapses Friday

The Silver State Bank of Henderson, Nevada was closed by US regulators Friday, the 11th US bank to collapse this year amid a surge in soured real-estate loans stemming from the worst housing slump since the Depression.

Silver State, with $2 billion in assets and $1.7 billion in deposits, was shut by the Nevada Financial Institutions Division and the Federal Deposit Insurance Corp., the FDIC said Friday.

Shares in Silver State have fallen 97% in the last year.

Fannie and Freddie Bailout

In a move not dissimilar to a Premier League manager getting a vote of confidence from the board days before getting the sack, reports emerged late Friday that the US government WILL put troubled mortgage lenders Fannie Mae and Freddie Mac under federal control.

Fannie & Freddie own or guarantee almost half of the country's $12 trillion in outstanding home mortgage debt.

At $5.2 trillion in mortgage securities, even a mere 1% loss from foreclosures wipes $50 billion off the bottom line for Fannie & Freddie.

The CEO's of both companies were told Friday that they and their boards would be replaced and shareholders value diluted, but the companies would be able to continue functioning with the government standing behind their debt, according to the New York Times.

Shares in both companies dropped in after-hours trading late Friday with Fannie shares falling 16.9 percent to $5.85, whilst Freddie's shares fell 7 percent to $4.74.

Shares in both companies traded at over $65 a year ago.

CME Proposes Changes To CBOT Wheat Contract

In a half-hearted sop to appease traders and farmers upset about the recent lack of convergence between CBOT wheat futures and cash wheat the CME announced Friday that it was proposing to change the terms of the CBOT wheat contract.

CME, parent of the CBOT, has proposed to industry regulator the Commodity Futures Trading Commission that storage rates be increased. It also seeks to add delivery points and lower the amount of vomitoxin in delivered supplies so that futures and cash prices come together, or converge at futures expiration it said.

The price difference between the futures and cash markets has now widened to more than $2 a bushel at some U.S. Midwest locations. That spread has historically been much smaller.

Many grain traders had hoped for the exchange to impose "forced load-out," compelling buyers or "longs" of futures contracts to take physical delivery. Those ideas continue to be floated, along with options to downsize the enormous influence of Wall Street investment money.

Traders note that "passive" investors such as commodity index funds, which typically buy and hold futures, currently hold a net long, or bought, position in CBOT wheat futures representing nearly 50 percent of the open interest in the contract.

The exchange is recommending storage rates be increased to 8 cents per bushel per month from 5 cents for the NEXT July-November period, ie July 2009 onwards.

CME is also proposing expanding delivery points to include Midwest rail and barge terminals. Current delivery points are Toledo, Ohio, Chicago-area terminals and St. Louis.

Additionally, the CME proposed lowering the maximum allowable vomitoxin in soft red winter wheat delivered against the contract to 2 parts per million, from 3 ppm, starting with the September 2011 contract.

The spec funds will be quaking in their boots won't they?

Informa And Allendale Released Markedly Different Production Forecasts

An exceptionally wet start to the growing season followed by largely ideal weather conditions ever since still has the trade scratching its head over final corn & soybean output in the US.

This was highlighted Friday with the release of two very different production estimates from highly regarded firms Informa and Allendale.

Consulting firm Informa Economics forecast the U.S. corn crop this year at 12.406 billion bushels, and soy production at 3.035 billion bushels.

Commodities brokerage and research firm Allendale Inc forecast U.S. corn production this year at 12.090 billion bushels and soybeans at 2.818 billion bushels.

Allendale's annual survey of farmers in 20 states conducted August 15 to 29 this year was lower than Informa's corn estimate by 316 million bushels, and 217 million less for soybeans.

In August, the U.S. Agriculture Department forecast corn production at 12.288 billion bushels and the soybean crop at 2.973 billion. USDA will update its estimate on September 12.

CBOT Closing Comments

CORN

Corn futures closed sharply lower Friday. Commodity prices had a mostly down week as nearby corn futures lost 36 cents since last week. Funds weighed in on prices as they were sellers of an estimated 8,000 contracts. Funds are still liquidating and open interest fell nearly 4,500 contracts on Thursday. Weather remains bearish, rains help finish most crop plants and frost threats are not in the forecast for the next week, both pushed prices lower. USDA released export sales early this morning: 200,200 tonnes for 07/08 and 389,400 for 08/09. 251 deliveries were issued against the September contract. Informa pegged this years crop at 12.406 billion bushels compared to the USDA's August number of 12.288 billion. Sep closed -17c at 5.31/bushel.

SOYBEANS

Soybean futures closed down sharply on spillover selling pressure from other grains and outside markets. Soybeans were off for the week as well, losing $1.56 in nearby September since last Friday. Funds were heavy sellers Friday selling an estimated 8,00-9,000 contracts of beans. Rains in most Corn Belt regions benefited pod filling and is weighing in on prices. South Korea bought 110,000 tonnes for 08/09 delivery. Informa pegged 2008 total production 3.035 billion bushels compared to the USDA's August number of 2.973 billion. Fundamentals may not be trading too much in commodities as large index funds are packing up and taking money off the table. Sep beans closed -54 at 11.80; Meal -14.40 at 341.00; Oil -135 at 48.18c/lb.

WHEAT

Wheat futures lost over 25 cents in nearby September contracts at CBOT, KCBOT, and MGEX. Long Liquidation and technical selling was responsible for the collapse in wheat Friday. Funds sold an estimated 4,000 contracts in CHI. CBOT wheat has extremely wide basis for the last couple of months. Carry in the market has allowed traders to continuously roll contracts holding that basis wide with large supplies. CME Group is now recommending changes to those contracts such as: higher storage rates, increased delivery points and lower vomitoxin levels. The September contract was pressured by large deliveries issued (1,230). Sep CHI -25c at 7.29; KC -27c at 7.73; MPLS -31c at 8.03/bushel.

EU Wheat Sets Fresh 13-Month Lows

EU wheat futures set fresh 13-month lows Friday before settling with London Nov feed wheat £2.75 lower at £114/tonne and Paris Nov milling wheat EUR4.50 at EUR172.50/tonne.

On the week Paris Nov has fallen EUR13.50/tonne and London Nov £6/tonne.

Paris Nov corn closed Friday EUR5 lower at for a loss of EUR20.20/tonne on the week. Paris rapeseed closed EUR3.50 lower for a loss of EUR20.25/tonne on the week.

The dullest August on record, combined with the fifth wettest summer ever, have conspired to make this year’s campaign in the UK one of the most difficult in recent memory.

Quality remains a big issue for what wheat (generally estimated to be 30-40% of the crop) has still to be cut.

Whilst much of our crop is still in the field, final output is still uncertain, but estimates are creeping higher with some figures as high as 18mmt. This means that the UK is likely to have an exportable surplus of 3.5-4.0mmt this season

The French corn harvest will soon be starting and that is adding pressure to feed wheat and barley.

Whilst UK wheat is competitively priced relative to French wheat the six million dollar question is do foreign buyers want the kind of quality that we've got?

Stores are full and driers are working flat out to get moisture levels down from 19-20 percent and more.

With fuel costs where they are wheat at 19% moisture is costing more than £10/tonne to get it down to the required level of 15%, said one trader.

However what grain has been cut seems generally to be yielding fantastically well. This season's barley crop has been called “the best ever, in terms of yield and quality” with yields of 2.8mt/acre compared with an average winter barley yield of 2.5mt/acre and spring barley at 2.1mt/acre.

USDA Weekly Export Sales Report

The USDA released their weekly export sales report, a day later than usual due to the Labour Day holiday, at 1.30BST today. Here's a note of how the numbers stacked up(vs trade expectations):

Wheat 436,600MT (100-350,000MT)

Corn 589,600MT (400-800,000MT)

Soybeans 280,500MT (200-550,000MT)

Soymeal 147,700MT (15-125,000MT)

Soyoil 7,900MT (0-15,000MT)

Canada's Wheat Crop Also Contains High Proportion Feed Grade

Canadian feed grain prices are facing downward pressure after the country's Wheat Board confirmed unfavourable weather during harvesting had increased the amount of crops down-graded to feed.

Bruce Burnett, a weather and market analyst for the CWB, said Western Canada’s feed wheat supplies from its prairies are heavily determined by the weather. Heavy rains over the last few days have seen increasing amounts of wheat downgraded to feed category.

The same situation has also been seen in Europe.

Mr Burnett Said: “This year, in terms of the lower quality of feed quality wheats, we're seeing quite an increase in supply of that type of wheat.

“Certainly in parts of Europe and the former Soviet Union we've seen some difficulties during parts of their harvest that's caused some downgrading to feed.

“As well, the protein levels generally speaking have been fairly low in those regions which have also caused some of the wheat to fall into the feed category.”

eCBOT Close/Early Call

eCBOT futures closed sharply lower with corn down 13-14 cents, wheat 25-26c lower and soybeans 35-37c easier.

All three products ended at or near 3-week lows as rains moved through some of the driest areas of the U.S. Midwest, giving a boost to late-developing crops.

Plunging global stocks and oil prices also pressured grains, as increasing prospects for a softening global economy boosts the value of the U.S. dollar relative to other major currencies, making U.S. grains expensive for overseas buyers.

For this afternoon's CBOT ession early calls are: Corn futures to open 12 to 15 lower; soybeans 30 to 35 lower; wheat 20 to 25 lower.

EU Wheat Futures Hit Fresh 13 Month Lows

EU wheat futures set fresh 13-month lows in early trade Friday with Nov London feed wheat hitting £115/tonne and Nov Paris milling wheat hitting EUR173.50/tonne.

At 11.15am London time both contracts were slightly above session lows with Nov feed wheat at £115.50/tonne and Nov milling wheat at EUR174/tonne.

Both markets are now at their lowest levels since early August 2007.

Increased global supplies and falling commodity and stock markets are dragging wheat lower one trader said.

December wheat on the overnight eCBOT market is also sharply lower, down 22 1/2 cents to $7.54 1/2/bushel.

US Weather Outlook

Tropical Depression Gustav is centered over the Ozark Plateau and moving northeastward into southern Missouri, producing heavy rain and causing local flash flooding, USDA's Joint Ag Weather Facility reported Thursday. But generally, the rains are aiding latedeveloping summer crops - especially soybeans - in Missouri, Illinois, eastern Iowa and southern Wisconsin. Rain is also beginning to spread into parts of Indiana and Michigan. Elsewhere in the U.S.:

In the West, cool conditions linger across the Rockies, but hot weather is expanding from California into the Great Basin and the Southwest. The late-summer heat favors fieldwork and summer crop maturation.

On the Plains, cool, showery weather is slowing final spring wheat harvesting across northern areas. Meanwhile, rain associated with Tropical Depression Gustav is departing the east-central Plains. Across the remainder of the central and southern Plains, dry weather favors fieldwork and crop maturation.

In the South, a line of thundershowers stretches southward from Kentucky and Tennessee to the central Gulf Coast. In the wake of Gustav’s rainfall, which locally totaled 10 to 20 inches, lowland flooding continues in parts of Louisiana, Mississippi, and Arkansas. Producers continue to assess the effects of Gustav’s wind and rain on sugarcane, open-boll cotton, unharvested rice and sorghum, and other crops.

Near-term Outlook: The remnants of Gustav will lift northeastward and produce locally heavy showers in parts of the Midwest. Farther west, cool conditions will accompany developing showers on the Plains, while hot weather will expand across the West. In the tropics, Hanna will approach the Carolina coast by late Friday or early Saturday as a strong tropical storm or category 1 hurricane. During the weekend, rain and wind will spread northward through the middle and northern Atlantic Coast States.

Extended Outlook: The National Weather Service 6- to 10-day outlook for September 9-13 calls for above-normal rainfall across the southern half of the Plains, the Gulf and Atlantic Coast States, and the Great Lakes region, while drier-than-normal weather will prevail from northern California to the northern Plains. Meanwhile, above-normal temperatures in Florida and west of the Rockies will contrast with cooler-than-normal weather from the Plains to the Northeastern and Mid-Atlantic States.

USDA Weekly Export Sales Report Expectations

The USDA release their weekly export sales report, a day later than usual due to the Labour Day holiday, at 1.30BST today. Here's a note of what is expected:

Wheat 100-350,000MT

Corn 400-800,000MT

Soybeans 200-550,000MT

Soymeal 15-125,000MT

Soyoil 0-15,000MT

US Attache Revises EU Grain Crop Higher

The U.S. Ag Attache in the EU-27 says while expectations for the size of the EU-27 grain crop have again been revised upwards, to 300 MMT, this month, quality concerns are mounting. Within this total, wheat production is put at 146 MMT and barley production is expected at 63 MMT.

The attache says yield forecasts remain good, but weather related delays to the progress of the harvest, most notably in the north, are causing some concern for the quality of the crop that remains in the ground. "Weather over the next few weeks will largely affect milling quality of small grains while total tonnage should remain at or above levels reported here," says the attache.

In the UK, the attache says harvest is less than a quarter complete. "In contrast, this time last year less than a quarter remained in the field. That said, the winter barley harvest is complete and reported to be good in both terms of yield and quality whilst wheat yields are thus far reported to be good," says the attache.

Russian Grain Harvest Latest

Russia, the world's fifth-largest grain producer, expects to harvest at least 95m tonnes of grain this year, according to official estimates.

The Agriculture Ministry said Thursday that Russia exported over 2m tonnes of grain, mainly wheat, between July 1 and August 18.

Analysts expect that Russia will export some 20m tonnes in the 2008-2009 crop year, which began in July, 2.5m tonnes of it in September.

It seems widely accepted that like the Ukraine, Russia's wheat crop will consist of a large proportion of feed wheat this season.

In his latest report the US Agricultural Attache said "prices of feed quality wheat and barley continue to fall rapidly, while the price of milling wheat stabilized due to low production."

The attache raised his 2008 crop production estimates saying, "the increase is due to good weather conditions in July and August, reported harvest progress, and excellent yields of winter grains - especially winter wheat - in European Russia."

"If the Russian crop doesn't ultimately come in above 100mt then I'm Ruud Van Nistelrooy," said one incredibly good-looking UK broker.

Ukraine Grain Exports Up Near Twenty-fold

No thats not a mistake. Ukraine exported almost twenty times more grain in the first two months of the 2008/09 marketing year than they did in the prvious season.

UkrAgroConsult quoted preliminary official data as showing grain exports in June/July totalled 3.8mmt, up from just 203,000mt a year earlier.

Exports included 1.5m tonnes of wheat and 1.8m of barley. Ukraine plans to harvest up to 50m tonnes of grain in 2008 they said and see exports at 22.6m tonnes in 2008/2009 against 4m in 2007/2008.

Last year, the harvest totalled 29.3m tonnes.

OPEC Organise Large Fight In Viennese Car Park Next Week

OPEC's thirteen members account for about 40 percent of the world's oil production. They are (ranked by July production levels): Saudi Arabia, Iran, the United Arab Emirates, Kuwait, Iraq, Venezuela, Nigeria, Angola, Libya, Algeria, Qatar, Indonesia and Ecuador.

How many of them would you trust to look after your kids? It looks a bit like the guest list at a Kray wedding to me.

The decline in oil prices in recent weeks has been a welcome relief for consumers and a rare piece of positive news in an otherwise bleak economic landscape. But for oil producers, increasingly accustomed to rising revenues, falling prices are fast turning into a cause for concern - if not quite panic.

Oil prices have fallen by a third in the past seven weeks and are headed for a drop below the symbolic $100 threshold for the first time since March. Though not a full-blown collapse, the speed of the decline is prompting some soul-searching within the OPEC oil cartel.

Venezuela and Iran, the leading price hawks within the group, said they did not want oil to fall below $100 a barrel, a price Iran's oil minister recently said was a "minimum" level. Both countries signaled that members of the Organization of the Petroleum Exporting Countries needed to reduce their output to prevent prices from dropping further.

Other OPEC members, like Algeria or Kuwait, fear that high energy costs could jeopardize their exports as the global economy slows down and consumers reduce their consumption. Saudi Arabia, the world's top oil exporter, has not said what would be a fair price, although King Abdullah has said that $100 was too high.

For OPEC's dignitaries, meeting in Vienna next week, managing the current slowdown is tricky. Cutting production to stem the price drop could spark a backlash and paint the oil cartel as greedy and short-sighted. Leaving production unchanged may precipitate the decline in prices at a time when oil demand is slowing.

Producers have become used to these high prices, which have powered an unprecedented economic boom in the Middle East, Russia and South America. From the gleaming towers of Abu Dhabi to the new cities burgeoning in Saudi Arabia, producers are relying on the income to develop new industries, attract new businesses and expand their economies.

This year should be no exception. OPEC's export revenue should exceed $1 trillion, according to estimates from the U.S. Department of Energy. The exporters have earned $642 billion during the first seven months of 2008, nearly as much as they did last year.

But the cartel is facing a dilemma. Demand for oil in the United States, the world's biggest market, has fallen by about one million barrels a day as a result of high prices, slowing economic growth and credit woes. The economic slump is spreading to Europe, and could also affect Asia, the main driver of oil demand growth. Also, the third quarter of the year is traditionally the time when refineries need less oil as they shut down for their annual maintenance.

At a recent meeting of producers and consumers in Jidda, Saudi Arabia pledged to keep pumping full out to bring prices down. The kingdom is OPEC's biggest producer and the group's de facto leader. At the same time, analysts said, the Saudis realize that if they keep their output at the current level, they will create a glut in the market. The kingdom is pumping about 600,000 barrels a day more than its official quota.

Some analysts believe the group may opt for an informal cut in production, reducing output without much fanfare, instead of a formal announcement that could prove to be too politically sensitive for some of the cartel's pro-Western allies, especially with the U.S. election season in full swing.

Another option may be to convene another meeting in six to eight weeks and announce a big reduction then. The group is already scheduled to meet in December in Algeria, but that could be too late for OPEC to act if prices keep declining through the autumn.

Ukraine Wheat Prices

Feed wheat purchasing prices have decreased on the export market of Ukraine this week, according to IA APK-Inform`s data.

Exporters do not have a great deal interest in feed wheat purchases and prefer to buy milling wheat they said.

As of Thursday the average purchasing price for wheat was 850 UAH/t (181 USD/t СTP-port), down 11 USD/t compared to the beginning of the week.

Australian Wheat Closes Lower On Rains

Australia's benchmark ASX January contract closed A$6 lower at A$329/tonne Friday.

Heavy rain and strong winds moved from Queensland into NSW on Friday, as an intense low formed off the east coast, according to weatherzone.com.au. The low is part of the same system responsible for bringing more than 50 millimetres to parts of Queensland’s southern interior in recent days.

The rains are seen as beneficial for the developing wheat crop in Queensland and NSW.

Australia is expected to produce around 22mmt of wheat this year, up 9mmt on 2007. Drought has ravaged the crop the last two seasons but farmers are "cautiously optimistic" for this years harvest a trader said.

South Australia Wheat Crop Estimate Raised

South Australia's winter wheat crop production has been revised up 13% by the state's Department of Primary Industries and Resources.

Wheat production this year is now estimated at 3.26 million tons, up 13% from its July estimate and up 39% on last year, according to the report.

July rainfall was good and August rainfall has been "average" says the report, warning though that timely spring rains are still needed to see the crop reach its full potential.

South Australia typically produces around 15% of total Australian wheat output. Western Australia is the largest yielding state accounting for around 40-45% of the country's total production.

Competition Time: Spot The Combine Harvester

Britain is due for a weekend washout as forecasters warn that heavy rain and strong winds will continue to lash the country, leaving many areas vulnerable to flooding warns the Telegraph.

The Met Office has also issued a "severe and extreme" weather warning for the South West and North East of England, with almost a month's worth of rain expected in a matter of hours today (FRI).

Two flood warnings have been issued by the Environment Agency for the Peterston-super-Ely and St Fagans areas of Cardiff, as the first Atlantic storm of the autumn takes hold.

A further 12 areas across Devon, Cornwall, Wales, Buckinghamshire, Northamptonshire and Gloucestershire are advised to stay on the alert, with flooding of low-lying land and roads deemed likely.

Only northern Scotland will escape the wet weather, and could even experience some sunshine.

Forecasters have warned that the rain will carry on into the weekend and beyond, with the Midlands bearing the brunt of the deluge on Saturday.

A Met Office spokesman said: "Almost every part of Britain will experience heavy rainfall this weekend, it is a pretty miserable outlook. An area of low pressure will move into the South West over Thursday night and Friday morning, and will push a band of rain across the country to the North East.

"Saturday will bring more heavy showers and although things will improve in the South West on Sunday, there will still be wet weather for the eastern side of the country.

"Looking into the week, there isn't much respite. We expect it will be generally unsettled, with further outbreaks of heavy rain across the country."

The intense weather front crossing the country on Friday is predicted to see more than 50mm (1.96 inches) of rain fall in some areas and will be followed by thunder and lightning. The torrential downpour will be accompanied by wind speeds of up to 50 miles per hour.

Overnight Grains Lower

The grains complex slumped on the overnight eCBOT market as the dollar advanced against the euro, reducing the appeal of U.S. supplies to overseas buyers.

The euro dropped as much as 0.7 percent to $1.4214 against the U.S. dollar, the lowest since Oct. 24. The European currency has fallen for seven straight days.

Soybeans for November delivery declined as much as 30.5 cents, or 2.5 percent, to $12.04 1/2 a bushel, the lowest since Aug. 15, in after-hours electronic trading on the Chicago Board of Trade, and stood 22 1/4c lower at $12.12 3/4 as of 08:15 a.m. London time.

Corn for December delivery fell as much as 10 cents, or 1.8 percent, to $5.54 1/2 a bushel and traded at $5.55 1/4 as of 08:15 a.m. London time. The price has fallen 30 percent from a record $7.9925 on June 27.

Wheat for December delivery dropped as much as 16.5 cents, or 2.1 percent, to $7.60 1/2 a bushel, and traded at $7.62 1/2 as of 08:16 a.m. London time. Futures have fallen 43 percent from a record $13.495 on Feb. 27 after farmers globally increased acreage to take advantage of a 77 percent price rally in 2007.

Crude Declines On Dollar, Economic Worries

Crude oil fell in New York, set for its biggest weekly decline in a month, after the dollar rallied and concern deepened that a global economic slowdown will pare demand.

Oil has fallen more than 6 percent this week as the euro dropped to the weakest this year against the dollar amid signs Europe's economy is slowing. Demand for crude will increase 1 percent in 2009, the slowest in seven years, OPEC said in its forecast last month, as high oil prices stunt growth.

Crude oil for October delivery fell as much as 64 cents, or 0.6 percent, to $107.25 a barrel, and traded at $107.46 at 8:00 a.m. London time on the New York Mercantile Exchange. Yesterday, oil dropped 1.3 percent to settle at $107.89 a barrel in New York, the lowest close since April 4.

Prices are down 27 percent from the record $147.27 reached July 11.

Dollar Hits High Note Vs Euro/Pound

EURO

The dollar climbed to the highest in almost a year against the euro Friday morning on concern that a credit- market slump will lead the world into a recession, prompting investors to sell higher-yielding assets.

The euro declined after Luxembourg's Finance Minister Jean-Claude Juncker said the currency is "overvalued."

The euro fell to $1.4297 from $1.4325 yesterday. It earlier touched $1.4214, the weakest since Oct. 24. The euro may decline to $1.40 in the coming months analysts said.

POUND

The pound fell against the euro and the dollar, headed for a fourth weekly loss, after the Bank of England kept interest rates on hold, making an economic recovery less likely. The pound is set for a seventh weekly decline versus the dollar.

The pound was at 81.30 pence per euro by 8:10 a.m. in London, from 80.25 pence a week ago. It fell to 81.88 pence yesterday, the weakest level since the single European currency debuted in 1999. The pound was at $1.7610, after earlier slipping to $1.7538, the lowest level since April 2006. It has dropped 3.3 percent in the past week.

CBOT Closing Comments

CORN

Corn futures closed moderately higher on Thursday. Spread trading and technical buying was a major theme in the pit today. Funds bought an estimated 2,000 contracts but corn remains pressured by favorable rains insuring ear filling potential. Deliveries against the September contract reached 102 contracts. The US dollar index continues to strengthen pushing most commodities lower; crude oil had another off day settling around $107 per barrel and weighed in on corn prices. Open interest fell tremendously yesterday, dropping over 10,000 contracts another signal funds are leaving the playing field. South Korea bought 55,000 tonnes of US corn adding support. Sep +2c at 5.49/bushel.

SOYBEANS

Soybean futures shot lower on firmness in the dollar and declining crude oil. Funds were net sellers of soybeans, and are quoted selling 2,000 lots of beans and 2,000 contracts in bean oil. Rains that fell over the past few days should benefit pod filling and scattered showers are forecast throughout the weekend which is bearish as the crop lacks maturity but could turn bullish if rains are forecast for an extended period. China continues to be absent in buying bulk amount of beans and soy products. Argentinean farmers remain unsatisfied with current legislation on tariffs and are blocking some exports. Sep -17c at 12.34; Meal +$2.3 at $355.40; Soyoil -95 at 49.53/lb.

WHEAT

Wheat futures shrugged off declines in soybeans, gaining strength to close higher on the day. Most wheat contracts are attempting to firm up after steady selling pressure over the last two weeks that pushed prices lower. Support came from Louis Dreyfus when they pegged Australia's crop at 21-22 million tonnes moderately lower than Australia's government estimate of 23.7 million tonnes. Reports of Argentina's crop being stressed by lack of moisture once again, help support most contracts. Sep CHI +3 at 7.55; KC +1 at 8.00; MPLS -1 at 8.34.

UK: August New Car Sales Lowest Since 1966

New UK car registrations last month hit the lowest level for any August since 1966, industry figures show.

The Society of Motor Manufacturers and Traders (SMMT) said that new car registrations were down 18.6% to 63,225 compared with the same month in 2007.

It said that declining consumer confidence was hitting sales across all major European markets.

It has called on the UK government to take "sustained action" to boost the economy and restore confidence.

As well as weaker consumer confidence, the high price of petrol has also been deterring buyers.

eCBOT Close/Early Call

eCBOT futures closed with corn around 2c weaker, soybeans mixed mostly 2c easier to 2c firmer and wheat around 9c firmer.

Wheat is getting support from ideas that recent sharp declines will be sufficient to attract some further export interest following on from Egypt's purchase yesterday.

Corn and soybeans are seen benefiting from forecast Midwest rains.

US crude oil & distillates stocks released later today may have some impact on crude which could spill over into corn & soybeans.

The USDA weekly export sales report normally released Thursdays looks like being a day late due to the Labour Day holiday Monday.

Earliest calls for this afternoon's CBOT session are: Corn futures are expected to open 1 to 2 lower; soybeans mixed; wheat 5 to 7 higher.

Crude steady ahead of US inventory data

Crude is steady Thursday as markets awaited the latest weekly snapshot of US energy inventories.

The report is due a day later than usual because of Monday's Labour Day holiday in the United States.

Analysts are forecasting crude stocks fell by 300,000 barrels last week and that distillate inventories rose by 600,000 barrels.

The oil market is also looking ahead to Tuesday's meeting of the Organization of the Petroleum Exporting Countries amid speculation OPEC could cut output if prices hit 100 dollars or below.

In addition, now that fears over Hurricane Gustav have eased, attention is also starting to focus on a string of other approaching storms out in the Atlantic.

At 12 noon London time October crude was 74 cents firmer at $110.09/barrel.

Pound Advances As BoE Leaves Interest Rate Unchanged

As widely expected, the Bank of England left the benchmark interest rate unchanged at 5% thursday. Following the announcement, the pound advanced against its major counterparts. Shortly after the decision was announced the pound was trading around a cent higher against the dollar at 1.7808 and at 0.8122 versus the euro.

UK house prices in double digit fall

UK house prices recorded an annual fall of 13% since last August, wiping £25,000 off the value of the average UK property in a year according to Halifax.

The lender said that property prices dropped 1.8% in August compared with July, leaving the cost of an average home in the UK at £174,178.

Halifax warned homeowners that market conditions will remain challenging, as it revealed that the annual decline is the steepest it has ever recorded - since it began compiling data in 1983.

The figures show that the average price of a home in the UK was at the same level in August 2008 as it was in February 2006.

The figures were released just a few hours before the Bank of England's Monetary Policy Committee was set to announce its latest decision on interest rates.

Wiseman Opens GBP80 Million Somerset Dairy

Robert Wiseman Dairies opened what they say is Britain’s most efficient and environmentally advanced dairy yesterday.

The £80million development has been created at Bridgwater in Somerset.

It has the capacity to process and pack 10% of Britain’s fresh milk requirements and has been specially designed to reduce energy, water and plastic use, as well as food miles.

The site already has capacity for 250million litres (54.992million gallons) of milk a year but chief executive Robert Wiseman used the opening to say the firm had already started work to lift this to 350million (76.989million gallons). The site when fully utilised will have the ability to process about 500million litres (109.984million gallons).

He added: “Bridgwater is the largest single investment in the British dairy industry to date, and we believe it represents a step change because of the focus placed on use of energy, water, materials and waste.

“It is located in the heart of one of Britain’s largest milk-producing areas, which keeps farm tanker miles to a minimum.

Wiseman now processes and distributes milk from 22 sites across the UK from Cornwall to Aberdeen. It employs more than 4,500 people.

The firm supplies 27% of the UK’s fresh milk needs and last year processed 1.5billion litres (329.953million gallons).

Commodity Prices Face Meltdown

Recent price declines in the commodities sector are only just the tip of the iceberg. Over the coming weeks and months the entire complex faces "meltdown" with crude going to USD90/barrel and everything else going with it.

CBOT wheat $2/bushel lower than current levels. Australian wheat A$35-40 lower than current levels "not a problem at all."

Where on earth did I get all that from? Erm, would you believe Cargill's website?

You will need to be quick before this story disappears off the page:

Nurse!

Click the headline timed at 4.13EDT if it's still there. If it's disappeared off the bottom of the page then try here:

Parachutes & Tin Hats All Round

More Rain For Australia

They'll be complaining it's too wet next. I can just see the headlines "Australian wheat crop battered by rains"....

A severe weather warning has been issued for the Northern Rivers and Mid North Coast of NSW with flooding and gale force winds likely during the next 24 to 36 hours.

The wild weather will develop as a low pressure system deepens near the Queensland border overnight and drifts south down the NSW coast.

Up to 100mm is possible from Tweed Heads to the Hunter by Friday night, more rain than normally falls during the whole of September. Rain will also reach inland parts of northern NSW with up to 25mm possible on and west of the ranges.

The low will also generate strong winds across northeast NSW with gales and five metre seas likely along the coast. At this stage computer models predict the low will start heading east away from the coast by the time it reaches the central NSW coast but Sydney can still expect a period of strong winds and moderate rain late Friday and early Saturday.

Meanwhile spring has started on a wet note across Queensland with rainfall accumulations over most inland parts already rising above September averages.

The highest falls on Wednesday went to the Central West and Maranoa including 63mm at Chesterton, their heaviest rain in at least nine years. 46mm at Tambo was their wettest September day in around 90 years.

Southern areas which missed out on winter rains also received a healthy drenching with Charleville's 33mm their heaviest in eight months.

The rain spread further southeast on Thursday as low pressure trough deepened near the NSW border. Heavy falls developed along the coast during the morning with 63mm hammering Maleny in just six hours. By 5pm Brisbane's water catchment had picked up around 25mm.

Yet More Argy Bargy

Argentine truckers are blockading ports disrupting grain supplies to facilities already struggling to regain normality after the crippling round of farmer strikes earlier in the year.

The disruption started last week but has deteriorated considerably Wednesday according to reports.

The truckers' protest started last Wednesday at a crushing plant and port facility run by Bunge near Rosario, with strikers extending the measure to the ports of Ramallo, Quequen and Bahia Blanca in Buenos Aires province.

Overnight the dispute has spread to San Martin, San Lorenzo and Ramallo ports in Santa Fe Province.

Union leaders have vowed to maintain the strike until the export firms meet their demands for improved working conditions.

Overnight grains mixed

Overnight grains are mixed Thursday morning on the eCBOT market, with wheat around 3-4c steadier, corn 4-6c easier and soybeans 10-13c lower.

Wheat is buoyed by ideas that the recent price drop will be sufficient to stimulate foreign buying interest.

Egypt bought 292,500mt wheat yesterday, which included 120,00mt of US origin. Japan and Bangladesh are also in the market for tenders today.

Meanwhile beneficial rains in the Midwest are dragging corn and soybeans lower.

Crude Steady Around USD109 As US Pipelines Re-Open

Crude oil is little changed and steady around USD109/barrel in overnight trade as some US Gulf Coast facilities resumed production after Hurricane Gustav swept through the area earlier this week.

The Louisiana Offshore Oil Port, the biggest U.S. oil-import terminal, may restart deliveries today after shutting ahead of the hurricane, a port spokeswoman said.

Royal Dutch Shell Plc and ConocoPhillips said yesterday that Hurricane Gustav caused no damage to platforms in the Gulf of Mexico. Exxon Mobil Corp. workers are returning to production facilities, according to the company.

Meanwhile with the threat of more storm disruptions in the weeks ahead a test of the key $100/barrel level seems unlikely just yet. Keep your eyes on Hanna, Ike and Josephine.

OPEC meet on Sept 9th but are unlikely to order a reduction in output at current price levels most analysts say.

OPEC nations are producing at record levels at the moment and in the medium term there seems to be more risks to the downside than the upside.

If prices were to fall below $100/barrel then OPEC have very publicly stated that output would be lowered.

But then again, they are a barrel full of snakes, what they publicly say and what the actually do are two entirely different things.

Meanwhile a recent study by the RAC and Trafficmaster found congestion on Britain's motorways and major trunk roads fell by 12% in the first six months of this year compared with the first half of 2007, as British motorists cut back their journeys under mounting financial pressures.

Grim backdrop to UK rate decision Thursday

The looming threat of recession has left the Bank of England under intense scrutiny as it prepares to announce its latest interest rate decision.

The Bank's Monetary Policy Committee is expected to keep rates on hold at 5% on Thursday despite evidence the economic outlook is fast deteriorating.

Output ground to a halt in the second quarter while consumer confidence has been shaken by tumbling house prices.

Many economists expect rates to fall soon despite inflation worries.

The threat of inflation, which has risen sharply to 4.4% in recent months, has deterred policymakers from taking any action.

But the fear of a prolonged recession over the next 18 months is expected to sway the MPC to ease borrowing before the end of 2008.

The OECD has forecast that the UK economy will contract in the current quarter and the next - meeting the official definition of a recession.

Chancellor Alistair Darling heightened concerns about the resilience of the economy when he said recently that conditions facing the UK and other countries were "arguably the worst in 60 years".

A three-way voting split on the MPC in recent months has highlighted the difficulties facing the body in the current troubled climate.

Arch-dove David Blanchflower has persistently called for rate cuts to support the faltering economy and has warned of a sharp jump in unemployment if no action is taken.

However, another external member of the MPC, Tim Besley, remains more hawkish, urging a rise in rates to contain inflation which many experts believe could soon hit 5%.

While the other seven members of the MPC have voted for rates to stay on hold for several months, many experts believe they will not be able to hold this line for much longer.

"It now seems a question of when, rather than will, the Bank of England cut rates," said Howard Archer, chief economist at Global Insight.

"The MPC has clearly become markedly more concerned about the current state of the economy and the growth outlook in recent weeks, acknowledging that recession is very possible."

CBOT Closing Comments

CORN

Corn futures are traded lower with crude oil and fund liquidation the driving force on Wednesday. Crude oil has lost considerable amount of ground after posting highs in mid July around $145/barrel and is now trading its lowest levels since May below $110/barrel. The dollar continues on an uptrend pushing corn and other commodities lower, generally the dollar moves in long term trends and could be bearish to long term exports. Five deliveries were posted against the CBOT September contract. Sep -6 1/2c at 5.46 1/2.

SOYBEANS

Soybeans traded lower, but closed off session lows. Weather is bearish as scattered rain showers are forecast for much of the Corn Belt as a result of Hurricane Gustav. Many oil refineries in the Gulf expect to be back at full capacity by weekend, suggesting damages were little and is pressuring crude oil lower. Follow through selling from Tuesday is also evident. Private production estimates for beans were higher than USDA August projections and is seen bearish as trade was anticipating smaller production numbers. Sep Beans -50 1/2 at 12.51; Meal -11.80 at 353.10; BO -155 at 50.48.

WHEAT

Wheat futures traded mixed Wednesday but ultimately closed higher. Exports were supportive as Egypt bought 292,500 tonnes of US, Canadian, and Ukraine wheat. Weather remains bearish as Australia's crop is catching beneficial rains. Spring wheat is said to be 81% complete up from 61% in the prior week. Open interest fell 6,200 contracts in CBOT on Tuesday; continuation of index funds leaving commodities is weighing in most commodities. Sep +8 at 7.52 1/4c.

EU Wheat Closes Mixed

EU wheat closed mixed Wednesday, consolidating somewhat from recent heavy losses with Paris-based Nov milling wheat EUR0.75 lower at EUR177.50/tonne and London Nov feed wheat up GBP0.25 at GBP177.50/tonne.

CBOT wheat also took a break from some heavy declines the last few sessions which also took some pressure off although a downwards trend remains firmly in place.

Although the export market remains fairly slow Egypt bought 292,500 tonnes of US, Canadian and Ukraine wheat Wednesday, passing on EU-origin tenders adding fuel to the belief that despite recent declines EU wheat is still uncompetitively priced on the export front.

In addition Ramadan is coming shortly and that will slow export interest further traders said.

UK weather continues to be unkind to farmers looking to wrap up the harvest and uncertainties over quality issues still remain. Weather forecasts for the rest of the week show no signs of any break in the showery outlook.

The outlook for the Australian crop has improved over the weekend with reasonable rains and more forecast for the next few days which should help the crop through to maturity in many areas.

EU Wheat Slightly Firmer On Technical Bounce

EU wheat futures are slightly firmer Wednesday on a technical bounce from recent steep declines.

Paris November milling wheat is EUR1 to EUR179.25/tonne and London November milling wheat is up GBP0.25 to GBP117.25/tonne.

Prices hit 13 month lows in London and Paris yesterday as global supplies increase and crude oil weakened.

Crude is now under pressure from slowing global energy demand growth, rising inventories and a stronger dollar.

Support came from Egypt's overnight tender for 55,000 to 60,000 tonnes of optional-origin wheat for October shipment, and ideas that a stronger dollar will increase the EU's competitiveness on the export market.

eCBOT Close/Early Call

eCBOT futures closed mostly lower with soybeans leading the way after FC Stone lsst night pegged the 2008 US soy crop higher than the USDA's August estimate at 3.003 billion bushels.

Increasing shower activity in the western part of the Midwest this week should be favourable to soybeans.

eCBOT soybeans closed with old crop Sept 9c weaker reflecting stocks tightness. Further forward new crop months were down 18-25 cents. Corn closed around 8c lower and wheat mixed in light volume trade 4c higher to 8c lower.

Early calls for this afternoons CBOT session: Corn futures are expected to open 8 lower; soybeans 20 to 25 lower; wheat 3 to 5 lower.

Commodity hedge fund collapses

Hedge fund manager Ospraie Management has said that it will close its flagship fund after it plunged 27 percent in August on losses in energy, mining and natural resources equity holdings, in one of the biggest ever closures of a commodities-focused hedge fund.

The closure of the fund, announced by the firm's founder Dwight Anderson in a letter to investors on Tuesday, could be more bad news for Lehman Brothers, which took a 20 percent stake in the hedge fund manager in 2005.

The fund has slumped 38.6 percent this year because of bad bets on commodity stocks.

The shuttering of the Ospraie Fund, which opened in 1999 and managed $2.8 billion at the start of August, leaves Anderson's firm with three funds overseeing more than $4 billion of assets, down from $9 billion in March.

Another US Ethanol Producer In Trouble

Two months after opening an ethanol plant in Fairmont, Minn., Buffalo Lake Energy has been foreced to access to a $20 million line of credit from its parent firm to keep its furnaces burning.

The price of corn, at nearly $6 a bushel, is more than 2 1/2 times higher than when the Buffalo Lake Energy plant was announced in 2005.

Meanwhile in a government filing Friday, BioFuel revealed it had lost $39 million on hedging and related financial agreements with Minnetonka-based Cargill, Inc.

"Cargill has not yet been paid for approximately $22 million of these amounts," BioFuel said in a report to the Securities and Exchange Commission.

"The parent company currently does not have sufficient liquidity to retire these obligations," said BioFuel, whose subsidiaries operate the Fairmont ethanol plant and another in Wood River, Neb.

"The operating subsidiaries have received approximately $25 million of parent company corn inventory that it has not been reimbursed for," the company disclosed.

BioFuel said talks with Cargill aim to find a solution to the problem. "However, there can be no assurances that these efforts will prove successful," it said.

Wheat: It Can't Go Much Lower, Can It?

When you look at the market what's to stop it? Demand is the only thing. November London wheat is up a massive 75p this morning as I type to GBP118, GBP200/tonne seems like a long time ago now eh? Still prices are significantly higher than what we had become accustomed to as being "normal" so where do we go from here?

If we look at the supply side it's difficult to see a serious problem emerging. Argentina will have a lower crop this year, maybe 1.5-2mmt lower, the jury is still out a little while longer yet on Australia. The AWB say 20mmt, others say maybe 24mmt, I don't think there is anyone seriously still saying 26mmt anymore. Even if we take a worst case scenario of say 18mmt, that's still 5mmt more than 2007.

So there we have it, the only serious producer & exporting nation in the entire world due a drop in production this year is Argentina, and thats only a measly 1.5-2mmt. Not a significant tonnage in the overall scheme of things.

Everywhere else output is up in the region of 15-25 percent. Including here in the UK.

We are facing a crop of around 17mmt, when we finally get it all in, up from 13.7mmt last year. And much of that is going to be feed wheat. In a normal year we produce around 4.5mmt of milling wheat, it seems beyond dispute that there has been some quality loss this season, the uncertain thing is exactly how much.

Lets be generous and say just half a million tonnes of anticipated milling wheat won't make the grade and will end up as feed wheat. That gives us 13mmt of feed wheat to consume of export.

The Ukraine have in many ways had a similar harvest to what seems to lie in store for us, huge - but largely feed grade. Eighty nine percent feed grade to be exact that's around 24.5mmt of feed wheat. In 2007 their feed wheat production was 7.8mmt. Right, so they've got three times as much feed wheat in 2008 to consume or export.

Dark horses Russia are also expected to have a relatively high share of feed wheat in its new crop. As mentioned on here yesterday official estimates of the final output there may have been somewhat understated.

They have harvested 48.1mmt of wheat to date in Russia off 58% of the planted area. That gives them the potential to bring in a wheat crop of around 80mmt. Russian production in 2007/08 was just 49.4mmt according to the USDA.

Lets be kind and assume that they have got a better quality wheat crop than the Ukraine, say 30% making milling grade. That still gives them a feed wheat crop of 56mmt. Domestically they consume about 14mmt of feed wheat, giving them a whopping 42mmt surplus.

Like I said, a crop 1.5-2mmt lower in Argentina doesn't seem awfully significant when you look at numbers like this.

To further my research I asked a compounder this morning was wheat attractively priced relative to other feed materials at the moment. His reply was that at GBP117 into his mill it was so, so. What surprised me was the answer to the question "at what sort of money does the magic computer start pulling wheat into the rations in significantly higher volumes?"

The answer: Dropping the delivered price by £10/tonne didn't actually pull in a significantly higher volume of wheat, he had to drop it £20/tonne to £97 delivered to do that!

NWF Premilinary Results YE 31 May 2008

NWF Group PLC have released their preliminary results for the year ended 31st May 2008, the highlights are as follows:

• Turnover increased by 20.8% to £361.2 million (2007: £298.9 million)
  
• Operating profit £5.8 million (2007: £6.5 million)
  
• Profit before taxation £4.2 million (2007: £5.8 million)
  
• Basic earnings per share 6.0p (2007: 8.8p)
  
• Full year dividend per share unchanged at 3.9p (2007: 3.9p)
  
• Completion of £19 million new warehouse development

Crude Remains Below USD108

Oil prices have dipped below $108 Wednesday after Hurricane Gustav did not significantly disrupt output, and on concerns that slowing world growth will dent demand.

New York light, sweet crude fell more than two dollars to $107.70 a barrel.

Prices have fallen from their record of more than $147 a barrel in July amid evidence that some of the world's main markets may be heading for a recession.

At the same time, a number of political and currency risks have also subsided.

"Had it not been for the hurricane, we would have seen a lower price profile over the last week," said David Moore of Commonwealth Bank of Australia.

Oil prices have dropped more than $10 a barrel since Friday when prices hit $118/barrel, and touched their lowest level in five months this week.

Pound drops on falling consumer confidence

The pound fell to the lowest level in 2 1/2 years against the dollar after a private report showed confidence among British consumers stayed at the weakest in at least four years, strengthening the case for interest-rate cuts.

The pound also traded near a record low against the euro after Nationwide Building Society said its index of sentiment stayed last month near the lowest since the survey began in May 2004. Britain's services industry shrank last month, adding to evidence the economy is headed toward a recession, separate data showed today.

The pound fell as low as $1.7671, the lowest level since April 2006, and was trading at $1.7712 at 9:47 a.m. in London, from $1.7839 yesterday. The U.K. currency traded at 81.37 pence per euro, after falling yesterday to 81.64 pence, the lowest level since the single currency's debut in 1999.

Overnight Grains Markets

Overnight grains are mostly lower this morning on the eCBOT market with soybeans 9-18c lower, corn around 5-7c lower and wheat mixed 4c up to 7c easier.

Increasing shower activity in the western part of the Midwest this week should be favorable to soybeans, Meteorlogix said yesterday.

Meahwhile FCStone said that the US soybean harvest this year will be 3.003 billion bushels compared with 2.973 billion forecast by the government last month.

About 57 percent of US soybeans were rated good or excellent, down from 61 percent a week earlier and up from 56 percent a year ago, the USDA said in last night's crop condition report. About 61 percent of the corn crop got the top ratings, compared with 64 percent a week earlier and 59 percent a year ago, it said.

German Biodiesel Industry Running At Just 15 pct Capacity

Germany's biodiesel industry is only producing at about 15 percent of capacity largely because of high taxes, and large numbers of producers are facing closure, Reuters report.

The industry has been producing substantially under capacity this year largely because a biofuels tax increase on Jan. 1 hugely cut sales at petrol stations.

Germany's five million tonne annual capacity biodiesel industry had improved output marginally to 15 percent of capacity from 10 percent in June but capacity utilisation was still at disastrously low levels, Peter Schrum, president of biofuels industry association BBK, told Reuters.

At this time last year the industry was operating around 50 percent of capacity, the industry association has said.

The rise in fossil fuel prices this year had generated slight new biodiesel demand but the industry remained in a crisis, he said.

"German biodiesel is no longer competitive because of the tax burden," he said. "The B100 (petrol station) market for biodiesel is dead."

Producers argue that biodiesel needs to be at least five euro cents cheaper than fossil diesel because vehicles consume more of the green fuel. The tax rises mean the price is almost the same.

"I expect that more production plants will be closed and sold abroad in coming months," Schrum said. "Some have already been sold to the U.S. and Russia."

Germany increased taxes on biodiesel in January this year under the government's programme to raise taxes on green fuels to the same level as fossil fuels.

The government plans to increase taxes on biodiesel in January 2009 to 21 euro cents a litre from 15 cents now.

"The industry will not be able to survive this tax rise," Schrum said. "This rise will kill the rest of the B100 market and probably cause the final death of the industry, which is already half dead."

"I expect more biodiesel plants to declare insolvency in coming months. No industry can work for long periods at such a low capacity utilisation level."

On May 28, German biodiesel producer Campa AG, operator of a 150,000 tonne annual capacity plant, declared insolvency.

Australia Wheat Closes Lower As More Rain Arrives

Australian wheat futures closed with benchmark Jan ASX A$2 lower Wednesday following a sharply lower Chicago market.

Serious chart damage was inflicted in the overnight CBOT market as the December contract hit a fresh intraday low for 2008 of $7.57/bushel before settling 34 1/2c lower at $766 3/4.

An Australian dollar close to 12-month lows against the USD added some support traders said.

However recent weekend rains and the prospect of more to come later in the week are seen as beneficial and are pressuring prices lower.

Western, central and southern parts of Queensland can expect widespread rain during the next few days with some places gaining more than 50 millimetres.

Computer models are predicting a sharp upper trough to move over the east, causing a low pressure cell to develop over southeast QLD and northeast NSW. This will mean heavy rains for the region, thunderstorms and gale-force winds.

Rains continued to pour over central and southern Queensland overnight and during Wednesday, with some heavy falls picked up.

The most outstanding rainfall total received was in Longreach, in the heart of the state. The Airport received 45mm to 9am, its heaviest September rains in at least 45 years. It was also the wettest it has been in a year and a half.

Tomorrow, the rainfall area will broaden and spread eastwards, with models predicting up to 50mm over the southeast inland. By Friday, this rain should have contracted mostly to the coast and ranges.

FC Stone Release Crop Production Estimates

Private analytical firm FC Stone released their September US crop production estimates late Tuesday pegging US corn production at 12.159 billion bushels, with a yield of 153.4 bushels per acre. US soybeans production was cited at 3.003 billion bushels, with a yield of 41.0 bushels per acre.

The figures compare with the firm's August estimates of 12.197 billion bushels,
with a yield of 154.5 bushels per acre for corn and 2.993 billion bushels, with a yield of 41.5 bushels per acre for soybeans.

The USDA's August estimate for 2008 U.S. corn production was 12.288 billion bushels, with a yield of 155 bushels per acre. Soybean production was pegged at 2.973 billion bushels, with a yield of 40.5 bushels.

A revised USDA estimate is released on Sept 12th.

CBOT Closing Comments

Corn

Corn futures struggled on Tuesday after crude oil dropped over $5 to finish roughly $110/barell. Bearish weather forecasts of rain over the Corn Belt also weighed in corn, as most regions will need some moisture to fulfill kernels. Strength in the US dollar index was also seen bearish as it hovers around the 78 level. Transportation issues arise in the Mississippi delta from flooding and wind damages caused by Hurricane Gustav. Funds sold an estimated 6,000 contracts. USDA export inspections for last week were 33.099 million bushels and were within the trade guess. Deliveries against the September contract totaled 202. USDA decreased corn rating to 61% good/excellent down 3% from last week but up 2 points from a year ago. Sep -15c at 5.53/bushel.

Soybeans

Soybeans opened near limit down but found strength as buyers were willing to buy at those levels. Large decreases in crude oil and strength in the dollar ignited selling in the soy complex. Funds were sellers of an estimated 3,000 bean contracts, 1,000 meal contracts, and 2,000 bean oil contracts. USDA inspected 7.429 million bushels of beans for export last week; inspections were within the trade estimate range for 5-7 million bushels. Deliveries against the September contract totaled only three. USDA lowered the condition rating for beans by 4 points to settle at 57% good/excellent, but is 1 point higher than the previous year at the same time. Sep -30c at 13.04; Meal -2.50 at 364.90; BO -137 at 52.03.

Wheat

Wheat futures were held to their firm losses unlike corn and soybeans which backed off of their aggressive selling pressure. Funds sold an estimated 4,500 CBOT contracts. Fund liquidations and anticipation of a record size global crop weighed in on prices. Australia received beneficial rains for the second weekend in a row boosting yield potential. USDA inspections last week for wheat exports totaled 30.152 million bushels; exports were above the trade estimates of 22-26 million bushels. Spring wheat harvest is delayed by rains and cool weather. CHI -35 at 7.44; KC -26 at 7.92; MPLS -37 at 8.24.

The Russians Are At It Again - Current Grain Crop Well Understated

Following the lead from their cheeky Ukrainian neighbours Russia said Tuesday that their grain harvest was 65% complete at 84mmt, and that they expect this season's total output to be 95mmt, up 13mmt from 2007's 82mmt.

No stranger to subterfuge, the Russians only recently upped their 2008 output estimate up from 85mmt, a figure they have now virtually achieved with a third of the crop still to harvest!

Now you may recall that the Ukraine all the way through the growing season were consistently putting out substantially lower production forecasts than they in fact delivered.

It seems that Russia must have got their calculators from the same shop.

84mmt off 65% of your acreage gives you a final output of 129mmt not 95mmt. OK I'm assuming here that all the best land hasn't been harvested first and that yields on the remaining 35% will come in similar to those already harvested.

What I can tell you though is that for the Russian crop to "only" be 95mmt then the remaining 35% of unharvested land would have to yield just 1.5mt/hectare compared to the average so far this harvest of 2.79mt/hectare. Seems unlikely doesn't it?

The final Russian harvest looks like being well in excess of 100mmt you mark my words.

eCBOT Close/Early Call

eCBOT grains plummeted overnight as the energy markets collapsed with crude oil falling below $106/barrel at one stage as investors shifted their focus to slowing global demand after worries about Hurricane Gustav subsided.

Corn closed 26-30 cents lower, wheat around 34c down and soybeans 65-68c easier.

A broadly firmer dollar is also doing little to support the complex at the moment.

Earliest calls for this afternoon's CBOT session: Corn futures are expected to open 25 to 30 (limit) lower; soybeans 65 to 70 (limit) lower; wheat 30 to 35 lower.

Pound hits 2 1/2 year low vs USD

Sterling hit a 2 1/2-year low against a resurgent dollar on Tuesday, as the beleaguered UK currency's battering continued amid a view of a UK economy on the brink of recession.

A hefty fall in oil prices boosted the dollar to a seven-month high against a basket of currencies, putting the pound under more selling pressure after weekend comments from the UK finance minister that economic conditions are at their worst in 60 years.

Traders were broadly dismissive of a government plan to rescue an ailing housing market which has plagued the economy, a view that also helped drive pound to a 12-year low against a basket of currencies, while lifting the euro to a record high.

As part of the plan, the UK Treasury said it would waive stamp duty for properties worth less than 175,000 pounds for the next year in an attempt to boost buying in a struggling housing market.

Against a basket of currencies of UK trading partners, the pound fell to 88.5, its weakest since October 1996.

At 11.10am London time sterling was $1.7816, having earlier hit $1.7785, it's lowest since 17 Apr 2006. One euro was worth 81.36 pence, having earlier set an all time high of 81.61 pence.

Major Irish Chicken Producer Facing Liquidation

One of Ireland's biggest poultry producers was engaged in a desperate race against time last night to save 250 jobs, including part-time and seasonal workers.

Cappoquin Chickens was placed under the protection of the High Court in May. Financial information released then showed a deficit of more than EUR806,000 as a going concern, and one of EUR7 million if wound up.

Higher feed costs, bird flu and cheap South American and Far East imports are being blamed for the firm's reported demise.

Yesterday, hundreds of farmers, suppliers and workers staged a special rally to underline their fears for the future as the family-run firm faces a looming liquidation deadline.

EU Wheat Futures Decline For Eighth Straight Session

EU wheat futures are lower again Tuesday morning, declining for an eighth straight session, hitting levels last seen over a year ago.

Paris Nov milling wheat is currently EUR4 lower at EUR178/tonne, having earlier hit a 13-month low of EUR175.75/tonne.

London Nov feed wheat is GBP1.50 lower at GBP117/tonne, a level not seen since July 2007.

A sharply lower CBOT market after the long holiday weekend is dragging futures lower as is the falling price of crude oil after Hurricane Gustav failed to inflict much damage on US oil refineries in the Gulf of Mexico.

A weaker sterling and euro against the dollar is struggling to add support in the face of a sharp sell-off in commodities in general and global economic gloom.

Rains in Australia across the weekend may also have boosted crop prospects there traders said.

Crude Dives Below USD106

Crude oil prices dipped below $106 a barrel Tuesday in Asia — $10 below its close Friday before the Labor Day weekend — as investors shifted their focus to slowing global demand after worries about Hurricane Gustav subsided.

Light, sweet crude for October delivery was trading at $106.09 a barrel in electronic trading on the New York Mercantile Exchange midafternoon in Singapore, and at one point dropped as low as $105.46.

Traders were relieved that Gustav weakened as it approached the offshore oil rigs and Louisiana refineries, and appeared to have caused less damage than expected in New Orleans and surrounding areas.

But they quickly turned their attention to slowing global economic growth, speculating that will dampen demand for crude oil, even in developing countries such as China and India.

The same analysts that bulled crude up just a short time ago with talk of $150, $200 and more are now looking for prices to test $100/barrel in the next few days.

OPEC is scheduled to meet Sept. 9 and has indicated it may take action to defend the $100 a barrel level.

Australian Wheat Down A$51 In Eight Sessions

Australian ASX January 09 milling wheat closed Tuesday A$3.50/tonne lower capping a decline of A$51/tonne in the last eight sessions from a close of A$385/tonne on 21st August.

The decline comes after promising rains fell in eastern Australia over the weekend prompting some analysts to say that these rains are now sufficient to see the crops there through to maturity.

Meanwhile Western Australia is also seen as having a good chance of rain later in the week with some models predicting up to 15mm of rain for the Gascoyne, Central Wheat Belt and Great Southern districts on Friday, with rain continuing into the weekend.

Dollar hits six month high vs euro

The dollar rose to its highest level since February against the euro on speculation oil prices near a four-month low will support economic growth in the US, the world's largest energy consumer.

The greenback also advanced to its strongest level in more than two years versus the pound as Hurricane Gustav weakened before making landfall in Louisiana.

The pound fell to $1.7851 early Tuesday, the strongest since April 2006. Against the euro it rose as high as $1.4516, its highest since February.

The US currency was bolstered by speculation the Federal Reserve's seven rate cuts in the past year will help the world's biggest economy recover from a slump.

Overnight grains - sharply lower as crude tumbles

Overnight grains are sharply lower Tuesday morning after Hurricane Gustav failed to do much damage in the Gulf of Mexico and was downgraded to a Cat2.

US refineries in the Gulf are expected to re-open as early as today.

Corn is around 22-24c lower this morning, with soybeans around 37c easier and wheat 18c down.

Dollar strength is also weighing on the market, along with surging global wheat production.

Crude dips below USD110 as Gustav downgraded

Crude oil has dipped below USD110 Tuesday as Hurricane Gustav was downgraded, failing to leave a trail of destruction in its wake.

A special session of NYMEX was ordered yesterday (trades will be dated Tuesday) despite the US Labor Day holiday which saw crude rise as high as USD118.

Those gains were steadily eroded throughout the day as Gustav was downgraded to a Cat2 Hurricane and passed through the Gulf without causing any major problems.

US refinery operations, which had been closed as a precautionary measure, are expected to re-open today.

At 8am London time crude was $6.33 below Friday's close at $109.13/barrel.

EU Wheat Futures Continue Slide; UK yields astonishing

Paris-based milling wheat futures closed lower for the seventh session in a row Monday with November down EUR4 at EUR182/tonne.

With no guide coming from Chicago today due to the Labor Day holiday trading was slow and futures drifting lower on a lack of bullish news traders say.

Weaker crude oil following the downgrade of Hurricane Gustav to Category 2 added to wheat's woes late in the session.

London feed wheat closed with November GBP1.50 lower at GBP118.50, also its seventh straight lower close, and its lowest level in more than twelve months.

Reports emerging over the weekend continue to suggest astonishing yields on what wheat has been cut in the UK with 4-5mt/acre commonplace and some reports of yields in excess of 6mt/acre.

The six million dollar question now is where is it all going to go? Many storage facilities are already full and reports of wheat having to be stored outside are reaching Nogger Towers.

It seems that, carried away by a wave of enthusiasm, UK farmers planted as much wheat as they possibly could and might have used some of their extra windfall earnings to buy a new tractor or even a combine. They seem to have completely forgotten to invest in new storage however.

And all this with less than half the crop cut. Oh dear, there's going to be tears before bedtime on this one.

Egypt to grow wheat on 800,000 acres in Uganda

Egypt and Uganda are close to a deal allowing Egypt to grow wheat on 800,000 acres of land in Uganda sources say.

Uganda has suitable land and a favourable climate to grow wheat, but its potential has gone largely untapped until now.

Uganda is keen to cash in on soaring world food prices and has plenty of land available according to President Yoweri Museveni, who's government recently abolished rent on industrial land in an effort to attract investors in the country.

Egypt is on of the worlds largest wheat importing nations buying around 6mmt of the grain annually.

The deal is expected to be concluded before the end of the year.

Another example of if the financial incentives are high enough then world grain production comfortably has the ability to increase output.

The Ukraine has proven that this year and huge areas of land there still have the potential to double yields as do vast areas of Russia.

Paris Wheat Futures Continue Slide

Paris-based milling wheat futures are lower for the seventh session in a row Monday with November down EUR1.25 at EUR184.75/tonne.

With no guide coming from Chicago today due to the Labor Day holiday trading is slow and futures are drifting lower on a lack of bullish news traders say.

London feed wheat is mixed with November up 50p to GBP120.50, still only just above a nine month low of GBP120 set Friday. March feed wheat however is GBP1 easier at GBP125.25/tonne.

A sharply weaker sterling is seen a mildly supportive as it will help UK wheat become a little more competitive in the export arena.

Forecasts for a return to wetter weather continues to frustrate farmers efforts to get the wheat harvest in. UK grain farmers face some difficult decisions whether to cut their losses and harvest now with moisture levels high, incurring some hefty drying charges. Or to hope that the weather improves, risking a further deterioration in quality.

Ukraine Grain Harvest Near Complete At 43.12MMT

Through August 29, Ukrainian farmers had harvested 96% of grain and oilseeds (excluding maize and sunflowers) crops. The grain crop came to 43.12 mln tonnes with an average yield of 34.4 c/ha, according to the Ministry of Agricultural Policy of Ukraine.

The harvest comprised 26.78 mln tonnes of wheat, 13.41 mln tonnes of barley, 1.05 mln tonnes of rye, 487,300 tonnes of peas and 2.87 mln tonnes of rapeseed.

Additionally, farmers harvested buckwheat, millet and maize, and have begun to harvest sunflowers.

As of August 29, the buckwheat crop totaled 96,800 tonnes, millet - 6,400 tonnes, and the green weight of maize was 3.1 mln tonnes.

Also, it was reported that 303,300 ha of winter rapeseed were sowed which is 24% of the planned acreage.

Crude Falls As Gustav Threat Wanes

Crude moved lower by late-morning Monday on a forecasts that Hurricane Gustav is unlikely to intensify in the Gulf of Mexico before striking land.

Category 3 Hurricane Gustav, the most powerful system to hit the region since Rita and Katrina in 2005, is unlikely to strengthen before hitting the coast later today, the National Hurricane Center in Miami said in its latest advisory. Preparations for the storm have closed virtually all offshore oil production and about 10 percent of U.S. refining capacity.

Crude dipped as low as $113.12/barrel from a close of $115.46/barrel Friday after earlier posting gains as high as $118/barrel.

At 1.30pm London time front month October crude was $1.61 lower at $113.85/barrel.

UK July Mortgage Approvals Lowest On Record

The number of new mortgages approved for home buyers fell in July to just 33,000 - down by 71% on a year ago.

The figures from the Bank of England are a new record low and highlight the sharp slump in mortgage lending in the course of the past year.

The credit crunch has forced banks and building societies to ration their lending to only their most creditworthy borrowers.

The value of home loans in July was 3.23 billion pounds compared to 9.35 billion pounds in July 2007.

Bank lending to all mortgage borrowers, whether moving house or not, shrank by £12.1bn in July - far and away the biggest monthly contraction on record.

The collapse in business by specialist lenders other than banks and building societies, such as those specialising in sub-prime mortgages, is also illustrated by the Bank of England's figures.

In July 2007 these lenders gave out 32,000 mortgages for house purchase; in July 2008 they lent just 2,000.

Manufacturing also contracted for a fourth month in a row as the economy staggered toward a recession.

The pound dipped to $1.80006 on the figures, the lowest since April 2006 and to its lowest level ever against the euro of 81.36 pence.

Crude Up As Gustav Nears Landfall

Crude oil is up $1.31/barrel at $116.77/barrel this morning, having earlier risen to $117.25 as Hurricane Gustav threatens US supplies in the Gulf of Mexico.

Gulf Coast refineries have cut at least 1.56 million barrels a day of production, about 9.8 percent of the U.S. total.

Torrential rain and winds from Hurricane Gustav lashed the US Gulf coast early Monday after nearly two million people fled the killer storm.

Hundreds of troops were sent into New Orleans after what is being called the biggest evacuation in US history.

The eye of the storm was not expected to make landfall until later Monday.

Nymex electronic trading opened early today to allow traders to respond to Gustav. Trades will be dated Sept. 2 because of the U.S. Labor Day holiday.

Australia Gets Promised Rains

Australia got it's promised weekend rains, although falls in some areas were slightly disappointing according to some.

Still, rain in NSW and southern Queensland of 10-50mm were likely enough to to see crops through to maturity analysts said.

NSW's north-west grain belt received 25 to 50 millimetres of rain on Sunday, the Bureau of Meteorology said.

The country may get further rain this week in grain growing areas, with heavier falls expected in the nation's west, the National Climate Center said.

Western Australia, the country's biggest wheat growing region, may get between 15 millimeters (0.6 inch) and 25 millimeters of rain, with rainfall above 25 millimeters in some parts, meteorologists said.

Traders are still widely divided opinion as to the likely final size of the wheat crop with estimates ranging from 20-26mmt compared to 13mmt in 2007. The harvest begins in October.

Australia is forecast to regain it's position as the worlds third largest wheat exporting nation in the coming season after slipping to sixth in export rankings after severe drought the last two years.

Benchmark ASX January wheat closed A$4.50 lower Monday at $337.50/tonne.

Sterling Hits Record Low Vs Euro

Sterling fell to a two year low against the dollar and a record all-time low against the euro early Monday after Alistair Darling said the country's economic downturn might be the worst in 60 years.

There was a lot of weekend press about how bad the UK economy is at the moment, and that's weighing heavily on the market in early trade.

At 9am London time the pound was $1.8066 and one euro was worth 81.16 pence. Earlier sterling fell to as low as $1.8005 its lowest level since April 2006.

The pound slid to 81.36 pence to the euro, the lowest for sterling since the single European currency was launched in 1999.