Pre-Opening Wheat Market Report for 6/4/2010

July wheat was 1 3/4 cents lower overnight. The dollar index was mixed to higher.

The July wheat contract made a minor new contract low yesterday and then ticked just below that low overnight. A surge in the dollar later in the overnight session generated a flurry of selling in wheat, and traders indicate that they will be looking closely at the dollar to start the day session with concern that it could generate further selling in futures ahead of the weekend.

The USDA will issue its latest Export Sales report this morning and traders are looking for combined sales to again fall short of the 509,700 tonnes needed each week to reach the USDA’s export projection for 2009/10. With the 2009/10 season ending at the end of June, there would seem to be little chance that exports will catch up to the pace needed to meet the current projection, and that may result in a downward revision in exports on next Thursday’s supply and demand report from the current 2009/10 total of 865 million bushels.

Very hot weather in the southern Plains is expected to contrast with seasonal temperatures and periodic rains over the next week across much of the soft red wheat belt. However, this could all be swept aside by a massive dome of hot and dry air at the end of next week and into the following week.

In yesterday’s action, July wheat ended the day fractionally lower despite a late recovery in corn and a day-long surge in soybeans. Traders said that a higher dollar and favorable harvest weather in the southern Plains helped keep the lid on the wheat market, although forecasts of very hot and dry weather across the winter wheat belt in coming weeks is considered more of a mixed bag. This could bring some potential minor yield losses and improvements in protein levels to soft red wheat areas that are not yet harvested when the heat hits.

Sources in India indicate that the government could finally move to open up wheat exports if monsoon rains are normal this summer as expected.