Pre-Opening Wheat Market Report for 5/21/2010

July wheat was 2 1/4 cents lower overnight. The dollar index was higher this morning.

The July wheat contract has taken out the previous day’s low in each of the past 6 sessions, although yesterday’s low held during the overnight session. Traders indicate that a variety of factors are weighing on the wheat market including ample world supplies and increased competition from Europe due to a weaker Euro. The start of the winter wheat harvest and beneficial rains in the central Plains this week also weighed on the market along with some very negative price action in financial markets according to traders.

However, so far this week, the July contract has held fractionally above the contract low that was established at 460 1/2 in early April. News is light in wheat to end the week. Drier and warmer weather is expanding from the Plains into parts of the Midwest today and more warm weather is expected into this weekend and early next week across the entire winter wheat belt. Most winter wheat areas are expected to be dry into early next week although the northern Plains spring wheat belt and the neighboring Canadian prairies may see more than one rain system that could bring moderate rains with localized heavier rains.

China’s wheat imports in April were up about 4-fold from March at 131,422 tonnes according to customs data that were released today. This week’s US export sales were in line with trade expectations at 250,500 tonnes for the current marketing year and 205,200 for next year for a total of 455,700 tonnes. However, sales continue to lag behind the average total needed each week to meet the USDA’s latest export projection for 2009/10. This has had the effect of steadily raising that average from just over 250,000 tonnes as of March 25th to the present level of 376,700 tonnes. As of May 13, cumulative wheat sales stood at 95.7% of the USDA forecast for 2009/2010 versus a 5 year average of 95.9%. Sales need to average 377,000 tonnes each week to reach the USDA forecast.

In yesterday’s action, the July contract worked its way lower into the start of the day session. The market then traded sideways into early afternoon before rallying back near the overnight highs prior to the close