Pre-Opening Wheat Market Report for 3/26/2010

May wheat was 1 1/4 cents higher overnight. The dollar index was moderately lower.

The May wheat contract pushed to new contract lows yesterday and prices remained mixed to higher overnight despite a weaker dollar. Traders said that the ongoing competitive disadvantage of US wheat on the world market continues to be a drag on the market. This week’s reports that Russian wheat is now penetrating the Central and South American import markets showed further deterioration in the US position, and many traders found this discouraging.

This week’s export sales in wheat were in line with trade expectations at 371,200 tonnes for the current marketing year and 148,000 for next year for a total of 519,200. As of March 18, cumulative wheat sales stand at 92.1% of the USDA forecast for 2009/2010 versus a 5 year average of 91.2%. Sales need to average just 165,000 tonnes each week to reach the USDA forecast.

The International Grains Council (IGC) lowered its estimate for the 2010/11 world wheat crop by 1 million tonnes, but raised ending stocks by 1 million tonnes to a 9-year high of 199 million tonnes.

Food inflation in India fell back to a 5-month low for the week ending March 13th as winter crops began to arrive on the market. However, food prices were still up by 16.22% from the previous year.

In yesterday’s action, May wheat pushed to below the lows of early October, 2009 which were the previous contract lows. Traders said that a rally in the dollar combined with selling by funds and commission houses helped to fuel the decline yesterday, although a lower dollar overnight failed to provide more than minimal support to the wheat market.

Traders report that 25,000 tonnes of French wheat were sold to Puerto Rico. Traders estimate that Russia has sold 150,000 to 200,000 tonnes of wheat to several Latin American countries including Mexico, Brazil, Peru, Venezuela and Columbia in recent days. Improved moisture forecasts in eastern Australia have boosted some private forecasters to call for a crop above 22 million tons in 2010/11. The US agricultural attache in Australia is calling for a 22 million even, and Australia estimated last year’s crop at 21.6 million.