Pre-Opening Wheat Market Report for 7/14/2010

December wheat was marginally higher overnight. The dollar was marginally lower after closing just below its 100-day moving average for the first time yesterday. Deliveries against the July contract were 236 contracts, bringing the total for the delivery period so far to 14,681. Today is the last trading day for the July futures contract.

December wheat posted a fresh high for the move overnight, and traders indicate that this may keep sellers on the defensive. Traders continue to monitor fund activity amid recent expectations of continued short covering by trend-following (managed) funds which remained heavily net short in wheat as of the latest Commitments of Traders report.

Hungary’s agriculture ministry lowered its 2010 wheat estimate to 3.5 to 4.0 million tonnes today, versus a previous estimate of 4.53 million. This compares to last year’s crop of 4.4 million tonnes. Unconfirmed government sources in neighboring Ukraine indicate that their wheat crop may drop to 42.2 million tonnes from the previous estimate of 45.5 million.

These changes are not entirely unexpected, but they do add to the recent spate of lower wheat national wheat production forecasts around the world. The US and Australia are the main exceptions to these production problems with Australia considered somewhat vulnerable to a minor downgrade if rains are lower than average in key areas in the coming weeks.

Light showers are expected across the Midwest into the end of the week, but this should not interfere with the harvesting in the last few soft red wheat fields there. Mostly dry conditions have been seen in the central and western Plains in recent days with some showers and thunderstorms in the east and NE. Ninety degree temperatures are expected in the central Plains with temperatures somewhat more moderate in spring wheat areas in the northern Plains. This should be beneficial to harvesters.

China’s CNGOIC think tank slightly lowered its paddy rice production estimate today to 196.64 million tonnes from their June estimate of 197.34. They left wheat unchanged at 115.1 million.