Pre-Opening Wheat Market Report for 7/6/2010

December wheat was 11 3/4 cents higher overnight. Deliveries against the July contract were 1,379 contracts with the total for the delivery period so far now at 8,419. The dollar index was moderately lower.

Wheat started the week with a sharp overnight advance in the December contract. KC wheat was also sharply higher, with Minneapolis trailing by a narrow margin. Traders said that short covering by funds and other specs may be the key to recent gains with background fundamental support coming from lost acreage in Canada, a weaker US dollar and a damaging heat wave in Europe. Rains over the weekend provided some relief in Europe, but some analysts indicated that the rains may have been too scattered to provide general relief.

The Commitments of Traders report for the week ending June 29th showed mixed activity by funds. Trend-following funds were net buyers of 4,358 contracts to trim their very large net short position to 62,540. Index funds were net sellers of 4,910 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 63,417 contracts. This represents a decrease of 47 contracts in the net short position held by these traders.

The winter wheat harvest has benefited from recent dry weather in most of the Midwest, and it is now well advanced into the northern hard red winter wheat belt. The USDA will release its latest weekly Crop Progress report this afternoon, one day late due to the Independence Day holiday. Scattered and mostly light rains are expected in the central Plains into mid week with somewhat heavier amounts in the northern Plains by tomorrow. Much heavier rain is expected on the Plains and into the SW Midwest by Thursday, but this is expected to fall mainly in areas that have already been harvested for both hard and soft red winter wheat.

The Ministry of Agriculture in Russia lowered its grain estimate for this year to 85 million tonnes from a previous estimate of 88-90 million. This is due to drought, especially in the southern Urals.