The Morning Vibe

15/10/12 -- The overnight electronic market is sharply lower as Friday's capitulation continues. Beans are currently around 30-35 cents lower, with corn down 10-12 cents and wheat 6-7 cents easier.

Funds were estimated to have been net sellers of around 15,000 corn contracts, 10,000 soybean contracts and 4,000 wheat contracts on Friday. Further liquidation looks likely to be on the cards this afternoon.

As ever, when they are in this sort of mood, the rest of the market can't easily absorb the weight of selling (or buying). Add in a bit of throwing in of the towel from the weaker longs and it all looks rather messy.

China must be loving it, that's all I can say, as they were perfectly content buying beans at USD17.50/bu and now find themselves able to buy sub-USD15.00/bu. Does that mean we will soon start to hear stories of Chinese cancellations, who knows?

Fund money holds the key to where we go from here. Reuters are reporting that one un-named London-based hedge fund is "reducing its exposure in grain markets in favour of other assets."

Back to the fundamentals, Brazil got some rain over the weekend, and things there are finally starting to look up. "Showers will expand across northwestern and southern areas this week, favouring western Rio Grande do Sul, Mato Grosso, southern Parana, Goias, northern Sao Paulo, western Mato Grosso do Sul, and Santa Catarina. Amounts through Friday will be 0.50 to 1.5”, locally 3”, with 70% coverage," say MDA CropCast.

"Widespread showers this week will improve conditions for soybean and corn germination. The 6-10 day outlook is wetter in central and southern areas with above normal rainfall expected," they add.

In the US it's a bit of a two-edged sword: "Drier weather across the southern Midwest will aid corn and soybean harvesting, while harvesting will slow a bit across northern areas. Rain-free weather in the central Plains will allow dryness to persist in western NE, extreme northwest KS, and northwest CO," they say. The latter won't help winter wheat planting/germination of course.

The USDA will report on crop progress this evening, with corn harvesting expected to be around 75-80% complete, up from 69% last week, with beans around 70% done compared with 58% a week ago.

Defra say that the UK wheat crop this year will only amount to 13.3 MMT, with yields averaging 6.7 MT/ha, very similar numbers to those from the NFU last week. The OSR harvest will be 2.6 MMT and this year's barley crop 5.5 MMT, they add.

Agritel say that the recent wet weather in France has stalled the corn harvest, which currently stands at only 16% complete versus 55% done this time a year ago. Winter grain plantings are also slow off the mark at 14% done versus 29% last year, they add.

This year's Czech grain harvest is seen 20% down on last year at 5.8 MMT, according to the local Stats Office.