Pre-Opening Wheat Market Report for 6/1/2010

July wheat was 6 1/2 cents lower overnight and this pushed the July contract to new contract low territory. The dollar index was sharply higher and equities were lower.

Weakness overnight in wheat was credited to strength in the dollar and corresponding weakness in the Euro. The Euro is considered a particular problem because a lower Euro further enhances the price competitiveness of European soft wheat in the huge import markets of North Africa and the Middle East.

Russia wheat also continues to be highly competitive in that region with Egypt buying 180,000 tonnes of wheat from Russia late last week. There had been expectations that the US might be in the running for a portion of this particular tender, but that proved not to be the case. The wheat is for shipment in late June.

Weather conditions in the US winter wheat belt have gradually gotten drier over the past week although there were scattered heavier amounts from Iowa and SE Minnesota through the north central Midwest over the long holiday weekend. Temperatures have been normal to above normal in recent days and this is expected to persist through the end of this week in key growing areas. This weather is considered mostly beneficial to the late development of the winter wheat crop. Heavier rains have fallen in the northern Plains spring wheat belt recently, and more rain is expected in the region today.

The Commitments of Traders report for the week ending May 25th showed renewed selling by funds in wheat. Index funds were net sellers of 1,452 contracts. Traders in India report that millers in the southern part of that country have resumed wheat imports from Australia. This comes despite a bumper crop and big stocks that are concentrated more in the north. Despite large supplies, the price of some basic commodities such as wheat has risen above the price of imports.

On Friday, July wheat sold off to substantially lower levels and this took July wheat to a new contract low close. The low for the day held above the contract low on Friday, but new contract lows were established overnight to start the current week.