Wheat: Pre-Opening Wheat Market Report for 2/28/2011

March wheat was down 4 1/2 cents late in the overnight session. Outside market forces were a bit positive this morning. Deliveries against the March contract for first notice day came in at 1,674 contracts, which was about as expected. Ideas that China’s drought area has continued to shrink and that unrest in North Africa and the Middle East could slow movement of grain into the region helped to pressure the market overnight. Rains hit the Chinese wheat growing areas over the weekend to ease drought concerns, but more rain will be needed, especially in the north and northwest growing areas. Traders remain concerned that the western third of Kansas could see significant abandonment of acres if conditions remain poor. The monthly state-by-state reports will be released tonight, and many traders expect to see one of the worst-rated crops in history for this time of the year. March rainfall can spark a major recovery in crop conditions, but at least for the first week of March, rainfall looks very limited for this region. Saudi Arabia bought 275,000 tonnes of wheat from the US and Brazil over the weekend. March wheat closed 29 1/4 cents higher on the session Friday and down 45 3/4 cents for the week. Ideas that the surge in wheat demand could continue and talk that a bulk of the new business could go to the US as Europe runs low on exportable surplus was seen as a supportive force. The lack of rain for the western plains in the forecast plus weekly export sales that were nearly three times the pace necessary to reach the USDA projection helped support. Dry weather for western Kansas, western Oklahoma and west Texas was seen as supportive, with very limited amounts in the forecast for the next 10 days. The USDA expects a surge in planted area for wheat this year, USDA officials showing planted area at 57 million acres vs. 53.6 million last year. But poor weather during the winter has the estimated harvested acreage at just 47.5 million acres versus 47.6 million last year. This would be the lowest harvested area since the 2006/07 season and the second lowest of the past nine years. Weekly export sales for wheat came in much higher than expected at 1.008 million tonnes for the current marketing year and 105,000 for the next marketing year for a total of 1.113 million tonnes. As of February 17th, cumulative wheat sales stand at 86.6% of the USDA forecast for 2010/2011 (current) marketing year versus a 5 year average of 85.5%. Sales of only 318,000 metric tonnes are needed each week to reach the USDA forecast. The Commitments of Traders reports as of February 22nd showed non-commercial traders were net long 20,099 contracts, a decrease of 13,288 contracts for the week. The selling trend of the fund trader is seen as a short term negative force. Commodity index traders held a net long position of 207,289 contracts, up 2,015 contracts for the week.