eCBOT Ends Higher On Dollar, Crude

The overnight grains finished a choppy session in positive territory supported by a sharply lower dollar and firm crude oil. Beans closed around 9-10 cents higher, with corn up around 4c and wheat 6-7c higher.

Crude oil had hit $66.17/barrel by midday London time, on track for its largest monthly percentage gain in more than a decade, after Japanese and US data suggested the economic downturn may be moderating.

Oil prices are up by around 20% this month as bullish comments from the Saudi Oil Minister, improved Japanese industrial production and better than expected US durable goods orders are adding to the belief that better times are ahead.

In addition US crude stocks plunged by 5.4 million barrels in the week to May 22, the Energy Administration said, well above analysts' expectations of a 700,000 barrel decline. The decrease was particularly impressive in the light of US refineries increasing their operations by 3.3 percentage points to operate at 85.1% of capacity.

The dollar meanwhile is lower across the board, falling to it's weakest against the pound since early November at $1.6182, after news that South Korea said that it's national pension funds would hold fewer US treasuries in future. The spectre of GM filing the largest bankruptcy in history on Monday also added a bearish tone. Against the euro the dollar fell below $1.41 for the first time this year.

Drought is endangering more than 50 percent of the grain fields in northeast China's Heilongjiang Province, China's largest grain production base, said drought relief officials.

Hou Baijun, deputy commander of the provincial drought relief headquarters, said that 6 million hectares of grain fields, or 53 percent of the province's total are affected.

Argentina's soybean crop has been revised down again to 32.0 MMT by the Buenos Aires Grain Exchange, other estimates are lower still.

The 2009/10 Argentine wheat acreage is forecast at 3.7 mln ha by the BAGE, which would be the smallest area on record, and almost 20% lower that the 2008/09 area of 4.6 mln ha.

Eastern European wheat is also suffering from drought also in several countries and temperatures are set to rise significantly in June, according to forecasters.

This weekend will likely see the end of spring wheat planting attempts in the US, with farmers likely to abandon ideas in favour of alternative crops, particularly soybeans. US wheat prices have risen almost 20% this month as waterlogged fields have hampered spring plantings and winter wheat conditions deteriorate.

If that wasn't bad enough, there is also the chance of frost damage to Canadian and even some northerly US states wheat this weekend and early next week.

Corn plantings in the US are also expected to be largely wrapped up by this weekend, with any remaining unplanted acres likely switched into beans.

Now we eagerly await the USDA's weekly export sales data, released a day later than normal due to the Memorial Day holiday, at 13.30 BST. For beans trade estimates range from 700,000 to 900,000 MT; for corn 700,000 to 950,000 MT; and for wheat from 350,000 to 450,000 MT.