Late Call On Chicago

23/02/12 -- The overnight grains ended with beans 2-3 cents higher, wheat down 2-4 cents and corn narrowly mixed. Crude is a bit weaker.

The USDA's Outlook Forum pegged corn acres at 94 million, soybeans at 75 million and wheat at 58 million. All three look a bit bearish although none are stunning in their own right.

As well as potentially a record corn crop in 2012 the USDA also sees demand from the ethanol sector dipping off a little in 2012/13. With Ukraine now looking like it will have the potential for a record corn area of it's own this spring we may be seeing the start of a few cracks appearing in corn's armour.

Traders in Ukraine say that they are confident of exporting 14-15 MMT of corn in the current marketing year (the USDA say 14 MMT), and that they will at least match that total in 2012/13.

That would see them suddenly propelled into second place as the world's largest exporter of the grain, shipping more than a third of the volume that America normally sells abroad.

It seems entirely possible that given the likely large scale spring replant that will take place in Ukraine that they could easily beat 2011's production of 22 MMT given favourable growing conditions, leaving them the potential to export significantly more than 14-15 MMT.

If we know anything about Ukraine, it is that when they have a hefty surplus of anything they will take whatever price the market is willing to pay to turn it into cash.

Record US and Ukraine corn production competing head-to-head for sales, immediately after the northern hemisphere's wheat harvest has just wrapped up, fits in quite nicely with my long held vision of the grain markets setting the lows of 2012 around October/November time.

Sure, we may see some higher levels on offer in the short term on technical tightness, but longer term I think we are going lower (insert caveat about Mother Nature playing ball and unforeseen circumstances etc). Knowing what we know now, the market is setting itself up for a low in the last quarter of 2012, that's my belief.

Anyway, back to today. The USDA have confirmed the sale of 120,000 MT of old crop corn to China, and 110,744 MT of similar to "unknown".

Celeres reports Brazil’s soybean harvest at 19% complete as of Friday. They also peg 2nd crop corn plantings well ahead of year ago levels at 33.5% (nearly twenty points up on 2011), giving this crop the maximum amount of time to make up for yield losses in the main summer crop.

Corn planting in Mato Grosso is already 59% complete versus 18.7% this time last season. Celeres data also shows rapid growth and germination rates amongst this early planted winter corn.

The Rosario Grain Exchange have reduced their 2012 Argentine soybean crop estimate by a hefty 5 MMT from last month to 44.5 MMT. Corn production is now seen at "no more than 20 MMT" from 21.4 MMT last month.

Late calls on this afternoon's CBOT session: corn 1-3 cents firmer, beans up 2-3 cents, wheat flat to 2 cents lower.