Early Call On Chicago

13/10/11 -- The overnight grains finished lower with corn down around 6-8 cents, wheat falling 2-4 cents and soybeans 5-7 cents weaker.

Crude is around a dollar and a half easier after the International Energy Agency lowered its estimate for world oil demand. The dollar is a bit firmer. Both are negative for grains.

Russia's grain harvest is now at 91.8 MMT with 10% of the planted area still left to cut, implying a crop in excess of Putin's 95 MMT estimate.

The market continues to digest yesterday's USDA report, along with attempting to reconcile the European debt situation and it's impact on global trade.

Data just out shows that China's export growth in September was much lower than market expectations. Meanwhile the IMF have cut their growth forecast for Asia as a whole on the back of the fallout from the European debt crisis, saying that risks for Asia are "decidedly tilted to the downside."

Short-term, the trade is waiting for confirmation from the USDA of this week's supposed large corn and soybean sales to China, and clues to whether any of the reported soyoil business also came the way of the US.

Yesterday's USDA report was undeniably bearish for wheat, yet the Dec CBOT contract is still almost 20 cents higher on the week so far even after yesterday's slump, suggesting that further downside is likely.

The USDA resisted the temptation to increase US corn yields yesterday, contrary to market expectations. They also surprisingly dropped soybean yields, leaving potential for both to be revised higher in next month's report.

Despite lower US production estimates for both, world corn stocks are seen rising and soybean inventories holding steady in 2011/12.

Unless a South American weather scare is forthcoming the market will potentially now focus more on demand rather than supply. Against a background of slumping world economic growth, huge European debt, and the fact that it's only 11 weeks until the US ethanol blenders' tax credit expires there could me more downside on grains.

And that's before we start to look at America's debt problems and political indecision.

Early calls for this afternoon's CBOT session: corn 6-8 cents lower, beans down 5-7 cents and wheat 3-5 cents weaker.