Pre-Opening Wheat Market Report for 5/27/2010

July wheat was 4 3/4 cents higher overnight. The dollar index was lower this morning.

Traders said that a lower dollar overnight triggered short covering in wheat after new contract lows were established in the July contract this week. The weather outlook remains mostly dry and warm in the soft red wheat belt with a series of showers and thunderstorms expected to bring moderate to heavier rains to the northern Plains from today through the end of the week.

Very hot temperatures may push into the southern and south central Plains in coming days, and this is considered mildly supportive by some traders. The central and southern Plains are expected to remain mostly dry until some locally heavy amounts develop in parts of Kansas and Oklahoma to start next week. In Australia, widespread recent rains in New South Wales are said to have produced near ideal growing conditions there. NSW produces about 30% of Australia’s wheat crop.

Australia’s Bureau of Meteorology says that cooling water temperatures in the Pacific Ocean are raising the likelihood that a La Nina weather pattern will develop this year. These patterns typically bring increased rains to grain-producing areas of Australia. Monsoon rains are being delayed in India by a system of thunderstorms, but government forecasters there expect the monsoon season to get underway by the end of May. Russia says that it has planted about 20.8 million hectares to spring grains as of May 25th. This is 69% of the total acreage expected.

In yesterday’s action, wheat lost ground to corn and Chicago lost ground to KC. The USDA will issue its latest weekly Export Sales report this morning. Sales need to average 376,700 tonnes each week to reach the USDA’s current export projection for 2009/10. Traders report that Tunisia bought an additional 25,000 tonnes of soft wheat on top of the 75,000 tonnes that was reported on Wednesday.