The Morning Muse

11/10/10 -- Strength in corn from Friday night's unfulfilled buy orders saw corn open the expanded 45c limit higher, although it has slipped away slightly now to currently trade around 40c firmer. Beans are also trading around 40c higher, with wheat up 5c or so.

Corn is now well above USD5/bushel, with Dec having traded up to USD5.73 1/4 this morning, with many bulls now certain that USD6/bushel is on the cards (at the very least), possibly as early as this week. And they are probably right.

Yet rationing of demand has already seemingly started once we got through USD5/bushel, with US export sales dipping below expectations in two of the last three weeks.

The trade is already starting to think about plantings for 2011, and the need to "buy acres" is now being talked about on many of the newswires.

What nobody seems to be talking about is the livestock liquidation that will take place before US farmers even get around to tackling the thorny subject of whether to plant corn or soybeans next spring.

Food price inflation is starting to ring alarm bells around the world. Once again that will increase public awareness of the potential foolhardiness of the mandate (subsidised and paid for by the public) that requires a third of all the corn produced in America to go to produce ethanol.

I see the food vs fuel debate being resurrected, and this time the argument that crude oil is USD147/barrel wont wash.

The old chestnut of regulating speculative activity in the grains sector will also get a run out, and with the French at the helm of the G20 in 2011 there may be a greater chance of some action on that front than previously too.

Extreme volatility is the new name of the game. Nov London wheat went from GBP170 to under GBP150 (a move of more than 12%) in just one week last month, only to subsequently reside back at GBP170 again this morning.