Early Call On Chicago

23/05/11 -- The overnight grains started higher but closed lower with wheat down 8-10c, corn 2-4c lower and beans down 4-6c.

Dollar strength on the back of the old faithful "flight to safety" was the theme following credit downgrades for Italy and Greece. The euro slumped below 1.40 against the dollar for the first time since mid-March on the back of that.

Crude oil is also sharply lower, down a little over USD3.00/barrel on NYMEX and with Brent falling by a similar amount.

Slow US planting progress is what everyone is still talking about, the USDA will reveal how slow is slow tonight. Corn is expected to be 75-80% done, with beans maybe around the 40% mark and spring wheat up near halfway.

North Dakota, the leading spring wheat producing state, was only 15% planted last week compared to 68% normally. May 25 is the normal cut-off date for sowing, according to Martell Crop Projections.

Across the border Canadian sowings also still lag, very similar to last season. The USDA have Canadian wheat production set to recover 2 MMT to 18.5 MMT this year. Given that this year’s crop conditions are almost identical to those of twelve months ago then that is probably a somewhat optimistic assessment.

France, Germany and the SE of the UK continue way too dry. Official production estimates there from the likes of the USDA and Coceral are probably all very much on the high side of reality.

Western Australia has had some rain, but could certainly do with a bucket full more as wheat plantings there get underway.

China imported 3.88 MMT of soybeans in April, according to customs data, a near 8% fall on April 2010.

There are plenty of bullish fundamentals amongst that lot as you can see. The question is can the grains get themselves disentangled from the outside markets? It could also be argued that whilst the fundamentals now point higher, possibly we shouldn't be at the current starting point at where we now find ourselves.

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