September 3rd 2011

Morning Comments:

US row crop futures bounced on concerns further hot weather will continue to reduce yield prospects in both corn and soybean crops. Temperatures up to 40C were recorded in Kansas, Missouri and Illinois yesterday and forecasters predict much of the same again today. A storm in Iowa may help with the heat a little this afternoon but no rain is predicted for Illinois for most the week. Tropical storm Lee is expected to create heavy rain across much of the Gulf coast and may produce more weather problems for cotton grown in the Mississippi basin, consequently nearby cotton futures rose by 51 points. US wheat futures were basically a follower of corn, bar Minneapolis wheat which is running it's own race on short supply issues. Tropical storm Lee is not expected to bring relief from hard drought conditions across Texas and many farmers in that area are wondering if they will actually be able to plant their winter wheat crop at all this year. With private US corn yield estimates continually coming in even lower than the USDA forecast we are likely to see more volatility but at least it should set a firm floor in the US market around US$7.00+/bu. I think we have established which commodity is the leader last night, corn is king and will be king, at least in the US, for a while yet. As for the rest of the world corn is not king, Russian feed wheat is king and protein wheat is most likely to be a serious dictator as it appears the lion's share of the Ukraine crop is not going to make milling grades this year. European grains were pretty flat with the Paris rapeseed contract climbing a little of the back of US row crops as did ICE canola. With the dollar lower and US futures higher we should see local prices regain much of Friday's losses but we need more than synthetic moves at the moment we need some good old fashion physical demand to kick local prices higher.

Weather:

Cloud will begin to move into the Riverina later today ahead of a southerly change tonight. Little rain is expected across the VIC wheat districts until tomorrow but the models are showing the heaviest falls will be around the ranges not the farming country. We should see some cloud build up on Tuesday with a storm or two about the NSW wheat belt on Wednesday but quickly clearing NE on Thursday.