Early Vibe

03/12/10 -- Chicago wheat, which was 25c up in early trade yesterday, gave up much of those gains by the close finishing 8-9c higher on spillover weakness from corn and beans. That lost ground has been recovered this morning though, with the overnight session showing gains of 15-20c.

Australian milling wheat futures are soaring, posting 7% gains overnight for a rise of almost 30% in a week. The current La Nina episode, which is causing dryness concerns in Argentina, continues to dump rain across the entire grain belt on the eastern side of Australia which starts in Queensland runs down through NSW, Victoria and finishing in South Australia. "The same front has been hanging around now for about 7 days and looks like staying here for another week or so," says my newest Australian buddy Shaneo.

His wheat is now only likely to be suitable for feeding after earlier looking like being "the best they have been for as long as my father can remember," he says.

Thanks to Shaneo, Bill Crabtree and Andrew Jurgs who all emailed me to confirm that grain driers are indeed relatively few and far between Down Under, leaving most Australian farmers with little choice other than to sit back and watch the cricket whilst Mother Nature does their drying for them.

They're going to have to wait a while longer yet, QT Weather say that "A progression of storms will keep east Australia soggy for the next 10 days."

"In major cropping areas, rainfall anomalies for November were 50-150mm (2-6 inches) above normal, setting the stage for this month’s flooding, crop damage and harvest stoppages as rains have been relentless," they add.

Yet again, the quality wheat supply and demand picture continues to tighten.

Meanwhile the Chinese government got no bids whatsoever in this week's 300,000 MT soybean auction. It would seem that the minimum price was set too high to attract local interest. They also announced plans to auction off a further 100,000 MT of rapeseed oil next week. They sold 70% of what was on offer at their last auction.

The lucky old Chinese say that they had a record grain harvest of 546.4 MT in 2010, the seventh year of increases in a row, according to the National Bureau of Statistics. They say that production rebounded this year from last season's drought-affected crop. They don't explain how last season's drought-affected crop officially managed to top 2008's non drought-affected crop. Neither do they enlighten us on why last season they insisted that the crop hadn't been affected by drought. Better get me Charlie Chan on line two....

Brussels have now issued export licences for 10.1 MMT of soft wheat less than halfway through the marketing year, 40% up on this time a year ago. If we were to maintain that pace then we'd export 23.9 MMT in 2010/11, almost 2 MMT more than the USDA currently predict. The vast majority of this week's licences went once again to France - 396,000 MT.

Going back to QT Weather, they say that a second wave of ocean cooling means that we won't see La Nina peak until March. That's later than the Dec/Feb time frame that other forecasters are giving. If they're right that could continue to cause problems for South America, particularly Argentine soybeans and corn.