December wheat was 2 3/4 cents higher overnight. The dollar index pushed lower into this morning.

The wheat market posted very strong gains in both Chicago and KC yesterday and both markets were mixed to higher overnight with the gains coming late in the session.

Rain in the southern Canadian Prairies may be the most important supportive factor according to one analyst, although yesterday’s announcement that Saudi Arabia is in the market for 990,000 tonnes was thought to be the immediate trigger for buyers. Delivery periods for the Saudi purchase are said to extend from October 2010 through April 2011.

Fund buying and short covering by other specs was also a feature in yesterday’s rally along with buying by spreaders versus corn. Traders are keeping a close eye on fund buying given the huge net short position that trend-following funds continue to hold in wheat. December wheat pushed above the early April low at 507 during the day yesterday which may have also triggered some buying.

Forecast models for today and tomorrow are showing up to 4 inches of rain for parts of southern Saskatchewan and Manitoba. In the meantime, radar shows moderate to locally heavy rains moving through the northern Plains of the US. Mostly dry conditions to the south are considered beneficial as is the mostly dry forecast for soft red winter wheat areas into this weekend.

The Australian Bureau of Agricultural and Resource Economics (ABARE) revised its estimate of 2010/11 wheat production up by 1% from its previous estimate yesterday to 22.138 million tonnes after recent beneficial rains in the east. This compares to the current USDA estimate of 22.0 million tones.

The USDA will issue its latest weekly Export Sales report this morning and traders are looking for a total in excess of last week’s very disappointing 118,300 tonnes. Sales need to average 391,800 tonnes each week to reach the USDA’s current export projection.
bron:CME