CBOT Early Call

The overnight grains closed with wheat leading the way 1-13c higher, beans up 3-4c and corn 5-6c firmer.

It's not very often that Chicago follows Europe, it's usually the other way round, but it would seem that is what is happening today as the US returns to work after an extended holiday weekend.

US weekend weather and the forecast for the week ahead look non-threatening, crops seem to be generally in pretty good shape, the USDA will report tonight on crop conditions, and should indicate that soybean planting is now just about done.

China bought 120,000 MT of US soybeans and another 40,000 MT of US soyoil overnight, according to the USDA.

The Argy soybean harvest is just about over at 99% complete, and Celeres raised their estimate of Brazilian soybean production to 68.5 MMT, an 18% increase on last season.

The US winter wheat harvest is progressing well, again the USDA will report on that tonight.

China got some rain in the dry northeast, and the Chinese government's weekly corn auctions are attracting less interest than they were, with less than half of the 1.5 MMT offered being taken up this week.

Europe and Russian weather and potential crop losses are what the market has suddenly woken up to, even though nothing especially new has really come out this past few days.

Early harvesting results from southern France and Germany merely seem to confirm what we all expected already, yields would be down this year after the harsh winter, dry spring and recent heatwave.

Russia's Ag Ministry dropped their grain production estimate to 85 MMT yesterday, but again all that did really was get them into line with earlier forecasts from SovEcon.

Early harvest results coming out of Ukraine, if anything, seem better than they might have been.

It seems to me that this recent EU price spike has been fed by short-covering, and farmer reluctance to sell on the basis that "they were right all along" and the perception that this is only the start of a concerted move higher, to more realistic levels, that show them the margin they rightly deserve.

I don't dispute that they deserve a margin, the market usually does that. The USDA are out on Friday with a supply and demand report that should be bearish on wheat. If global wheat production numbers are falling, how likely is it that the USDA will be up to speed and report the reality of the situation anyway? Exactly. This my friends is a golden selling opportunity.

Certainly from an EU wheat perspective. US wheat, whilst expensive relative to EU grain, is also vulnerable to correction given then size of spec shorts in that too. If we do see US wheat move higher then all that is likely to happen is that the basis will widen further anyway.

Early calls on this afternoon's CBOT session: corn called 2 to 5 higher; Soybeans called 2 to 5 higher; Wheat called 5 to 10 higher.