For the past month, the Greek economy has been the talk of financial markets. Concerns over the health of this economy and has triggered a sharp decline in the Euro against other developed market currencies. Recently the $A has hit a record high against the Euro. So what is the problem? Greece stunned markets in October last year when it revealed that its budget deficit for 2009 would be 12.7% of GDP over twice as big the previous estimate and more than four times the 3% ceiling imposed by the EU. Debt is forecast at 120% of GDP this year, the highest in the euro zone. The government announced on March 3 a 4.8 billion euros package including across-the board cuts in the public wage bill, after initial pledges to cut the deficit to 8.7% of GDP this year failed to convince. Markets showed some relief at the deficit cutting plan and tentative EU support, pushing Greek bond yields lower - yields on Greek bonds fell below 6% for the first time since mid-February. Much of the 4.8 billion euro austerity plan, including fuel tax hikes, public servants bonuses cuts and a pension freeze has already been enacted. The government plans a tax bill later in March and a pension bill in April to increase the effective average retirement age to 63 from 61. Macro economic risks. Greece's official forecast of a 0.3% contraction of the economy this year is widely believed to be too optimistic. Unemployment is growing, tourism is not seen doing well and credit is tightening. All of this could affect Greece's capacity to meet its targets this year, by affecting GDP and in turn government revenues. Ultimately, Greece's fate will be decided by whether markets retain appetite for its debt. Markets appear still willing to lend, as last week's heavily oversubscribed bond issue showed. But to attract investors, Greece has to sell its debt at ever steeper yields - at 6.4% last week (The Greek PM is blaming speculators for forcing up borrowing costs). This further strain the budget and could choke off recovery, with banks charging higher interest rates to households and businesses. How other weak euro zone members such as Portugal, Spain and Ireland are doing and whether they avoid a spillover from the Greek crisis. Portugal became the latest euro country to announce austerity measures on Monday, in a bid to convince market it is not the next in line for Greek-style problems.

Following the January Annual Production Summary, USDA announced it would resurvey some states that had a significant amount of corn still in the field for a special 2009 corn crop update on March 10. Almost immediately, traders and crop watchers assumed this pointed down USDA?s national average corn yield estimate of 165bu/acre. But US ProFarmer is not so sure. It is skeptical ? about what yield-moving data USDA can collect from ?the few? acres that were unharvested at the time the January survey was done. Some late-season yield bumps may even push the national average yield up slightly in the March 10 update. US ProFarmer is not anticipating a major shift in the yield estimate on the basis of a resurveying of acres unharvested as at January. If, however, USDA?s statisticians take a closer look at issues like test weight and moisture levels (which isn?t supposed to happen) on the 92% of the crop that was harvested at the time of the Annual Production Summary survey, that could 'move the needle.'

In light of the recent market advice we published, suggesting a defensive hedging mindset in 2010, it was interesting to ProFarmer Canada's views on the market this week. ProFarmer Canada thinks markets are in transition from 2 years up (2007-08), 2 years down (2008-9) and now 2 years sideways (2010-?). That is..unless new fundamental catalysts arise to alter the general market course. If we are dealing with a transition into a period of sideways trending ag markets, we then should view market probes to the upper end of recent trading ranges (and hopefully higher) as selling opportunities. Fundamental foundations of the major ag markets are different than recent years and we should expect price ceilings to develop this spring. The USDA?s new crop US acreage forecasts due out on March 31 will likely be a reminder of bearish fundamental profiles in US soybeans, corn and wheat. It?s impossible to say with certainty, but without heightened new crop planting worries, a spring seasonal top may come early (that is now). CBOT corn and soybean futures are likely to run into resistance at prices 25-30US?/bu on corn and 40-50US?/bu above current levels. A move in the Nov 10 canola contract towards CA$405/t could be an initial target. The big hope for canola is a more favourable Chinese import policy ? bearing in mind that Chinese rapeseed prices are around CA$30/t above current Canadian landed values.