Early Call On Chicago

01/12/10 -- The overnight grains raced higher to start the month with wheat leading the way around 23-25c firmer, with corn up 8c or so and beans 16-18c higher.

Crude is up almost a dollar and a half, and the US dollar is a bit weaker. News that China's manufacturing index posted a 7-month high last month was also seen as evidence that their economy is continuing to grow, boosting the longevity of demand for grains from that sector.

Wheat is up on ideas that Australia's crop in the east is quickly becoming a wash-out, further tightening the global supply/demand picture for quality wheat.

The flip side is that much of this downgraded wheat will likely soon be making it's way to Asia to replace corn in feed rations.

Weather concerns also remain for US and Russian winter wheat.

There are assorted wheat tenders kicking around, but the Egyptian one will as ever be the most closely watched. News on that is expected later this afternoon.

Argentine dryness concerns are growing, with problems also in some areas of Brazil. At least one leading analysts has downgraded his soybean production forecasts for those two this week, with more downward revisions likely on the way - especially for the former.

Any delays in plantings in South America will postpone China's inevitable switch away from buying US beans, tightening US ending stocks for 2010/11 even further.

Malaysian palm oil values reached their highest levels in more than two years overnight. The February future in Kuala Lumpur broke through 3,500 ringgit for the first time since July 2008 on the strong export pace.

Early calls for this afternoon's CBOT session: wheat up 20-25c; corn up 6-8c; soybeans up 16-18c.