Early Call On Chicago

Posted by Nogger - a legend in his own mind at 12:52 | Categorized as

08/02/11 -- The overnight grains were lower across the board on news that China was to raise interest rates again for the third time since October. The latest rise, by a quarter percentage point like the other two, comes a day before Chinese markets are expected to return to normal following the Lunar New Year celebrations.

Crude oil and other commodities also fell on the back of the news. It has to be noted though that the previous two rate rises seem to have done little to hurt demand from China, and it would come as no surprise at all to see everything back up again by the end of the week.

Before that we have the USDA out with a plethora of data of their own tomorrow, so some book squaring liquidation tonight is highly likely, especially given the size of the fund long positions.

Trade estimates for tomorrow's US 2010/11 ending stocks estimates see corn forecast at 736 million bushels (from 745m last month and 1.708 billion at the end of 2009/10), soybeans at 135 million (140m; 151m) and wheat at 810 million (818m: 976m).

There may be increases for Brazilian soya production, and maybe a downwards revision for Argentina some are thinking. The USDA attaché in Argentina last week dropped their Argy soybean production estimate to 49 MMT, from the USDA's current 50.5 MMT.

They also pegged corn production there at 22 MMT, also 1.5 MMT lower than the USDA themselves said last month.

Tensions in Egypt seem to have eased somewhat. They bought 170,000 MT of wheat over the weekend, Turkey are in for 300,000 MT after Iraq bought a similar quantity yesterday and then immediately re-tendered for a further 100,000 MT. Algeria and Bangladesh are also in the market, with suggestions that Saudi Arabia & Iran might be next in line to get on the wheat buying merry-go-round. No sign of price rationing demand too much there just yet then.

Northern China may get some light rain this week, but 2-3mm isn't going to be a drought buster. Another Arctic blast is on the cards for most of the US this week, with only the PNW coast getting away with anything like normal temperatures. Winterkill could again be a problem in areas without a protective snow covering.

Early calls for this afternoon's CBOT session: beans down 8-10c, corn down 5-6c, wheat down 5-7c.