Early Call On Chicago

Posted by Nogger - a legend in his own mind at 14:45 | Categorized as

08/05/12 -- The overnight grains are mostly higher with beans up 1-3 cents, corn up as much as 8 3/4 cents nearby and 2-3 cents higher on new crop and wheat up 5-7 cents. Crude oil is almost a dollar lower, extending it's recent losing streak.

Having reported soybean sales to unknown/China every day last week, and again yesterday, the USDA are back again today announcing the sale of 225,000 MT of beans to China split 60,000 MT old crop and 165,000 MT new crop. They are also reporting the sale of 40,000 MT of new crop soyoil to "unknown".

How much longer the market can absorb these daily sales remains to be seen. It will also be interesting to see what these orders do to the USDA's old crop balance sheet projections on Thursday.

Despite seeming to have the most upside potential, it doesn't feel like soybeans are going to put in any significant gains ahead of this report though, given the heavy fund length that exists already.

There's some suggestion that China may have also bought old and new crop corn over the weekend, but there is no official confirmation of this yet.

US corn, soybean and spring wheat plantings are well advanced. So too is winter wheat maturity. That will tempt many to harvest early and double crop with corn, or more particularly soybeans. Informa last week suggested that soybean double cropped acreage will climb by 26% on last year.

Whilst the EU rapeseed crop is forecast to drop sharply to around 17.5 MMT by Rabobank, Canadian and Australian production is seen rising by 14-15%, possibly more in the case of the latter.

With a large US winter wheat harvest almost upon us, upside potential for that looks limited. Old crop corn is undeniably tight, but a probable record crop lies ahead to put new crop under pressure somewhere down the line unless we get a weather scare. Soybeans offer most upside potential given the large reductions in South American production and constant Chinese interest.

Looking further ahead into 2013 Informa last week forecast Brazilian soybean production at a monster 80.5 MMT, with Argentina chipping in with a record 60 MMT of their own as South American producers attempt to cash in on these big prices. In Brazil some of that will be down to new land coming into production, in Argentina it may be partially due to a switch away from wheat.

Early calls for this afternoon's CBOT session: corn 6-8 cents higher old crop and 2-4 cents firmer new crop; soybeans up 1-3 cents and wheat up 4-6 cents.