Early Call On Chicago

06/04/11 -- The overnight grains closed with beans around 9-10c higher, and corn & wheat narrowly mixed. Crude oil is a bit firmer and the dollar a little easier.

May corn is 4c off yesterday's all-time high of 7.70 1/4, although it would be no enormous surprise to see it set a fresh record high this afternoon given the euphoric high-five cheerleading going on.

An interesting report on the FarmAssist.com website throws this thought into the mix:

"Since last Wednesday's close, a Midwest farmer that uses 175 bpa for his corn calculations has seen new-crop revenue projections jump $90 per acre. If that same farmer uses 50 bpa for his soybean calculation, new-crop soybean revenue has increased just under $8 per acre. What message do you think he is getting?"

A valid point, well made. Given that almost all the talk at the moment surrounds "extremely tight corn stocks, the need to ration demand, record prices, China has bought (the USDA just haven't confirmed it yet) and need more, and the insatiable demand from the ethanol sector" then what would you do if you were a Midwest farmer? Plant more of course.

From a demand perspective, the higher the price of corn, the more likely it is that the ethanol blenders tax credit won't get renewed at the end of the year, I'd say. That could have far more of an impact on US corn demand in the 2011/12 crop year than China buying the odd million or two.

Of course, on the flip side, increased corn plantings may mean that soybean acreage is lower than the USDA currently predict.

Meanwhile the water cavalry didn't arrive and the US winter wheat crop looks to be in a serious mess, and spring plantings look like being late. Maybe the water cavalry went to the wrong address?

Estimates for Brazilian soybean production are rising again in some quarters, Conab now peg the crop at 72.2 MMT. That's 2.2 MMT higher than the USDA's March number. The latter will of course be issuing revised production estimates on Friday.

Some also see Paraguay chipping in with a crop of 8-8.4 MMT this year, also higher than the USDA said last month.

The USDA have just announced the sale of 101,600 MT of new crop corn sold to "unknown".

Early calls for this afternoon's CBOT session: corn flat to 2c higher, beans up 8-10c, wheat up 1-3c.