Early Call On Chicago

15/11/10 -- The overnight grains closed firmer, with beans, corn and wheat all up around 6-8c.

This morning's action can probably best be seen as a rebound from Friday's knee-jerk over-reaction to reports that China was to increase interest rates over the weekend. They didn't, and some commodities are creeping back cautiously higher this morning with crude oil up 81c to USD85.69/barrel and Dec palm oil up 26 ringgit.

Argentina have said that they are working on a "sanitary protocol" with China to pave the way for exports of Argy corn to the nation. With a record corn crop expected this season from the South American country, the Argies say that they hope to export 5 MMT the grain to China in 2011.

China are staying tight-lipped, although they are expected to sign a deal in the next few days with the Argies to import beef and barley. Having also recently resolved their spat over soyoil imports, there would potentially seem to be some possibility that these reports are true.

You could make out a case for that being either bullish or bearish on US corn, China want 5 MMT of corn next year, they just don't want your corn. Overall though you'd have to say it's long-term bullish the very fact that they potentially want to import anybody's corn.

The Chinese have also announced today that they are to limit the volume of corn that feed mills can buy at their weekly government auctions. That could also be seen as a sign of state reserves getting tight.

On the US weather front fairly widespread rains late last week and over the weekend should have improved winter wheat conditions on the Plains. The dry Ohio Valley missed out but is expected to get some relief later this week. The USDA will report on winter wheat crop conditions after the close tonight.

Australia is seen having it's second largest wheat crop on record, despite a severe drought in WA, although quality is questionable following persistent rains in the east.

Early calls for this afternoon's CBOT session: corn up 6-8c; beans up 7-9c; wheat up 5-7c.