Pre-Opening Wheat Market Report for 7/15/2010

December wheat was sharply higher overnight, pushing past the 600 level in the process. The dollar moved progressively lower overnight after two straight closes below its 100-day moving average this week.

Wheat surged higher again overnight with the December contract pushing above the 600 level for the first time since January 12th. Weather concerns and a lower dollar are being credited with sparking the overnight gains.

Bulgaria joined the growing list of major and minor producers who have lowered their wheat production estimates in recent days and weeks. They pegged their 2010 wheat crop at 3.5 million tonnes today, down from their previous estimate of 4.0 million. Unlike other areas of Europe which are suffering from heat and drought, this loss of production was due to excessive rains.

The list of recent downgrades now includes Bulgaria, Hungary, Ukraine, Germany, France and Morocco with previous bigger downgrades seen in Russia, Kazakhstan and Canada. Some analysts suggest that current weather patterns could bring further downgrades in Canada and Russia with some also citing the possibility of slight downgrades in China and India.

Other news is light with traders looking to this morning’s US Export Sales report for an indication of how the world’s importers are reacting to the recent gains in wheat prices. Today’s report will cover the week ending July 8th, which was the day that the first leg of the current rally peaked at 577 1/2 in the December futures contract. One analyst noted that if importers were strong buyers on that first price surge, they may continue to buy aggressively, as the market moves past 600, particularly if the dollar continues to move lower.

Wheat sales need to average 427,000 tonnes each week to reach the USDA’s export projection for 2010/11. They have hit above the average needed in three out of the past four weeks. Yesterday’s action in futures featured widespread diversified buying, following a surge to a new 13-month high in the Paris soft wheat market.