Pre-Opening Wheat Market Report for 7/12/2010

December wheat was mostly unchanged overnight. Outside markets were considered somewhat negative to start the week with the dollar trading moderately higher. Deliveries against the July contract were 1,153 contracts, bringing the total for the delivery period so far to 13,612.

The wheat market remains just below last week’s highs to start the week, as the winter wheat harvest winds down in the US and trend-following funds continued to cover their large net short position. The USDA’s supply and demand report on Friday was considered somewhat negative for wheat, while export sales were above trade expectations and perhaps a little supportive.

The USDA lowered its production estimate for Canada, the EU and the Former Soviet Union on Friday, as expected, but US production was raised above trade expectations with the all-wheat yield up an unusually strong 2 bushels per acre for so late in the winter wheat harvest. Analysts indicate this comes mainly on superb spring wheat conditions. The increased yield bumped all-wheat production to 2.216 billion bushels from 2.067 in June which was more than 50 million bushels above trade expectations. US ending stocks for 2009/10 were pegged at 973 million bushels with 2010/11 ending stocks 1.093 billion compared to 991 million on the June report.

Canada was lowered 4 million tonnes to 20.5 million. The EU was lowered just over 1 million tonnes to 141.82 million. The former Soviet Union was lowered by 7.5 million tonnes with Russia down by 4.5 million and Kazakhstan down by 3 million. China was increased by 2.5 million tonnes to 114.5 million. World production was lowered by about 7.5 million tonnes to 661.07 million. World ending stocks were dropped to 187.05 million tonnes from 193.93 million in June.

Last week’s export sales were above trade expectations at 513,600 tonnes. Wheat was the leader to the downside among the grains on Friday. Prices remained inside Thursday’s range with overnight action in turn remaining inside Friday’s range. Hot and dry weather remains a risk to spring crops in Russia’s Volga River Valley and the southern Urals region along with western and central Kazakhstan. Bangladesh is still awaiting results on its tender for 50,000 tonnes of wheat.