The Morning Markets

10/11/11 -- The overnight Globex grains are mostly a little firmer and European grains mixed in early trade. Italy is centre stage as it attempts to auction off EUR5 billion of one year bonds this morning. I have an uneasy feeling that things are going to develop very rapidly and very badly from here for what is probably the most corrupt nation in Europe with the knock-on effects being felt all around the globe.

The chance of a UK defaulting on it's debt would jump from 9% to 22% in the event of an Italian default, according to the Telegraph.

Chinese export growth meanwhile has slowed rapidly from 24.5% in August to 15.9% in October as the debt crisis hits European demand.

Under the circumstances the grain market has looked pretty resilient up until now faced with the unfolding European debt debacle. How much longer it can manage to do that as we lurch towards what is shaping up like a double dip recession remains to be seen.

In the UK, having had a sniff of selling wheat at GBP200/tonne ex farm, current levels of GBP142-145/tonne aren't getting too many excited so growers are sitting on their hands. Those that also grew rapeseed this year can still generate cash if they need it by selling that for GBP355-360 ex farm before bonuses.

That said, consumers aren't exactly banging the door down either. What's looking like another mild month isn't helping demand much. Export interest is also slack in the face of plenty of wheat and corn in Europe and the FSU.

Talking of which, the corn harvest in Ukraine is 81% complete at 17.5 MMT, according to the Ministry there. That suggests a final crop of 21.6 MMT, almost 10 MMT up on last year.

FranceAgriMer now peg French corn output at just over 15 MMT, an increase of 8.7% on last year's 13.8 MMT. The USDA place it even higher at 15.2 MMT having increased their EU-27 corn production estimate by almost 2 MMT yesterday to 62.85 MMT, a 12.6% increase on last year.