Pre-Opening Wheat Market Report for 10/11/2010
Related Keywords: Agriculture Email Print | December wheat was 6 cents higher overnight. The dollar was modestly lower, and corn was at or near limit up. December wheat moved limit up on Friday, before pushing higher again to start the week. Traders indicate that buying in wheat has been mainly by funds since Friday. Managed funds have been net short in wheat recently, unlike corn where they had been building a record large net long position prior to the latest report. Traders indicate that spillover buying from corn and fears of stepped up commodity inflation due to a lower dollar are combining with unfavorably dry conditions in the US soft red winter wheat belt to support the market. Dryness in the US is dovetailing with the longstanding pattern of crop weather issues for wheat around the world. This started with wet and cool weather in Canada during the spring planting season and famously shifted to the historic drought in Russia during late spring and through the summer. However, other weather issues have trimmed production or planted acreage or quality in countries from Germany to Eastern Europe and even parts of North Africa. If the huge US crop is also diminished, importers are likely to become more nervous about the prospect for food inflation and the social and political instability that often follow. One analyst noted that this in turn may motivate importers and all users to build and maintain larger inventories. The Commitments of Traders report for the week ending October 5th showed mixed activity by funds. Trend-following (managed) funds were net sellers of 8,743 contracts to increase their net short position to 31,704 contracts. This is the largest net short position held by these traders in any agricultural market. Index traders were net buyers of 7,271 contracts. On Friday’s reports from the USDA, ending stocks were lowered to 853 million bushels from 902 million last month. This was below trade expectations near 875 million. Wheat production was revised down by 41 million bushels but this was expected from the September small grains report. Feed usage was revised higher by 10 million bushels. The world numbers were considered somewhat supportive with ending stocks now pegged at 174.6 million tonnes from 177.8 million last month and from 196.5 million last year. World production was revised lower by about 1.6 million tonnes to 641.4 million tonnes. South Korea is looking to buy 52,185 tonnes of US rice.