The Early Vibe: Passing The Buck

01/08/11 -- US Republicans and Democrats have thrashed out an eleventh hour deal overnight to prevent the US defaulting on it's debts. The compromise now needs to get voted through the Senate and House of Representatives later today. The former should be relatively straightforward, the latter less so but it is still expected to muster enough votes to scrape through.

The deal requires USD2.4 trillion in spending cuts and savings being found over the next ten years. Conveniently for him, President Obama said that these cuts "wouldn't happen so abruptly that they'd be a drag on a fragile economy."

What happens if the economy is still fragile in a couple of years time Mr President? Erm, we don't have to concern ourselves with that right now. Next..

The deal also appears to include the key provision of allow Obama to "go it alone" and raise the debt ceiling himself unless Congress can manage a two-thirds opposition to the move.

So effectively we appear to have a "let's raise the debt ceiling today and make a pledge to introduce some unspecified spending cuts to justify it in a couple of years time or so when I may not be in office" sort of a deal.

Exactly how the ratings agencies view all of this also still remains to be seen. The markets however seem relieved more than brimming with confidence.

Chicago wheat is 8-10c higher on the overnights, although that is only recovering half of Friday night's losses. Corn is 6-8c firmer and beans 12-14c higher. In the case of corn that is also only half of what it lost on Friday and for beans it effectively gets us back to Thursday night's close.

The UK had a fine and warm weekend, which doubtless saw plenty of harvest activity. Rain is seen moving in from the west by the middle of the week though.

The weather has also improved on the near continent over the weekend, allowing widespread harvesting to resume in France this week.

We've got the USDA out after the close tonight with the latest crop conditions report, will they show corn and soybean good/excellent declining further? Probably, by 1-2 points on each I'd guess.