Early Call On Chicago: Risk Off

06/03/12 -- The overnight grains are lower with wheat leading the way down 10-13 cents. Corn is down 6-8 cents and beans, still the strongest leg, 3-4 cents weaker. Crude is 60-75 cents easier too in a general "risk off" mode.

Concerns about a slowdown in Chinese growth has the market a little worried, as they are the ones that have kept the demand Juggernaut on the road.

There are also a few jitters ahead of the Mar 8th deadline for private bondholders to agree to take a short, back & sides from Greece. Nobody seems to know how many of these guys would stand to qualify for an insurance payout if they simply say no. For those that are insured that has to be better than a more than 50% loss.

Whilst we are on that subject how many of these bondholders can't say yes, because their balance sheets can't take a 53.5% haircut?

And whilst we are talking about some being insured against a Greek default, who are they insured with and can they afford to pay out or is that going to make them insolvent too?

There are always more questions than answers with the Greek issue.

Given the price gains that we've seen of late in the grains, and the impending USDA WASDE report on Friday it is perhaps therefore not surprising that we should see a bit of profit-taking and "risk off" strategy coming into play.

A quick look at the fundamentals:

Agrimoney.com report that "US hard red winter wheat crops have bucked historical trend by leaving dormancy in better shape than they went into it" with good/excellent conditions in Kansas, Oklahoma and even Texas improving across the winter.

In other news a monster 230 page report from ABARES throws all sorts of interesting data our way today. So much so that it's difficult to know where to start, but I will try my best.

Starting in South America they see the Brazilian soybean harvest at 71 MMT this year, despite the drought in the south that's still the second largest on record. Argentina will chip in with 48 MMT, they add.

For wheat they see the US producing a crop of 58 MMT this year, a 6% increase on 2011. Europe's crop will amount to 140 MMT, up 2%, with Canada's rising by a similar amount to 26 MMT. Russia's output will increase 6% to 59 MMT, whilst Kazakhstan's will drop by almost a third to 16 MMT as yields there return to normal.

For corn they are forecasting both world and US production at record levels at 887 MMT and 333 MMT respectively.

World oilseed production in 2012/13 is also seen coming in at a record 467 MMT.

Nothing overly bullish in amongst that lot is there?

The USDA has reported the sale of 126,000 MT of old crop corn to South Korea overnight.

Early calls for this afternoon's CBOT session: wheat down 10-12 cents, corn down 6-8 cents, beans down 2-4 cents.