eCBOT Close, Early Call, US Selling Ethanol To Brazil?

The overnight session closed mostly a little higher with wheat and corn up around 2 cents or so and beans down 3/4 to up 1 1/4 cents.

Rain and freezing conditions are on the way for the US Midwest with snow in the northern and central Plains.

Whilst this might not knock too much off final yields it is enough to keep the market a little nervous. Quality might be more of an issue though. The cool and wet summer has caused some problems with mold in early harvested corn, according to some reports.

Stories are also circulating that the US has sold corn ethanol to Brazil, normally the world's largest ethanol exporter. The story goes that with world sugar prices so high Brazil is using it's sugar cane to make sugar not ethanol, and might soon start to import US product as all gasoline sold in the country contains 25% ethanol.

There are obvious bullish demand implications for US corn if that proves to be the case. Rabobank recently pegged US corn for ethanol use in 2009/10 at 4.3 billion bushels, or around a third of the entire US crop.

Brazil will produce around 51-52 MMT of corn in 2009/10, say CONAB, a similar amount to last season. Soybean production will rise to 62.3-63.3 MMT, they say, up from 57 MMT last season. The soybean estimate is in line with Abiove's prediction of 63.4 MMT late last week.

Japan is looking for 147,000 MT of wheat in it's usual weekly tender. 86,000 MT of that will be US origin.

Speculative funds and traders are still short big-time on CBOT wheat, leaving the market vulnerable to a sharp upwards correction as was witnessed last night.

Early calls for this afternoon's CBOT session: corn called 2 to 3 higher; beans called steady to 2 higher; wheat called 1 to 3 higher.